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Fitch Affirms `A+' Rating of Honeywell International

10 June 2000

Fitch Affirms `A+' Rating of Honeywell International

    NEW YORK - Fitch has affirmed the `A+' senior debt and the `F1' commercial paper ratings of Honeywell International. The Rating Outlook is Stable.

    Formed through the Dec. 1999 merger of AlliedSignal Inc. and Honeywell Inc., Honeywell International possesses a broad business base, with leading market positions across a range of aerospace, chemical, automotive, industrial and home and building controls markets. The cyclical sensitivity of the combined operations is moderated by the increased diversity of businesses and by the growing proportion of revenues derived from services and the aftermarket. Individually, each company has had a record of consistent earnings and conservative financial policies.

    The combined operations are expected to yield material synergies, particularly through the consolidation of the large aerospace operations. The company is implementing significant cost-reduction initiatives, including reductions in corporate-wide headcount of more than 11,000. These programs are expected to achieve $250 million in pretax cost savings in 2000 leading to a target of $750 million of annual savings in 2002.

    Honeywell's earnings trends are favorable and the company is expected to maintain strong quantitative credit measures, with double-digit EBITDA coverage of interest, strong cash flow from operations relative to total debt, and free cash flow after capital expenditures and dividends of approximately $1.3 billion. Free cash flow and debt capacity has historically been used for acquisitions or share repurchases, consistent with maintaining a strong credit profile. The company ceased share repurchases following the announcement of the merger in June 1999, which qualified as a pooling-of-interests.

    Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Corporations, Structured Finance, Sovereigns and Public Finance Markets worldwide.