Fitch Downgrades Stanley Black & Decker's $320MM Floating Rate Convertible Notes to 'BBB+'

CHICAGO--(BUSINESS WIRE)--

Fitch Ratings has downgraded Stanley Black & Decker Inc.'s SWK $320 million floating rate convertible notes to 'BBB+' from 'A-'. Stanley is currently remarketing these convertible notes, and to facilitate this process, the Black & Decker Corporation (BDK) guarantee of the convertible notes is being released. This action does not affect any of the company's other unsecured indebtedness. All of the company's other unsecured debt have cross guarantees among Stanley Black & Decker, Inc. and BDK (other than Stanley Black & Decker, Inc.'s junior subordinated notes).

Fitch currently rates Stanley Black & Decker as follows:

--Issuer Default Rating (IDR) 'A-';

--Bank credit facilities 'A-';

--Senior unsecured notes 'A-';

--Junior subordinated notes 'BBB';

--Short-term IDR 'F2';

--Commercial paper 'F2'.

Additionally, Fitch rates both BDK and Black & Decker Holdings LLC as follows:

--IDR 'A-';

--Senior unsecured notes 'A-'.

The Rating Outlook is Stable.

The ratings and Outlook for SWK reflects the cyclicality of certain of the company's end markets and integration risk associated with its recent merger with BDK, although overall risk is mitigated by considerable liquidity, expectation of decreasing leverage and substantial cost synergies of at least $350 million. Revenue growth synergies are anticipated and along with reduced costs should enhance future cash flow.

The end markets for the combined company are generally cyclical. However, BDK has a stronger correlation to the residential housing market (primarily repair/remodeling) and the consumer sector, and therefore tends to come out of recessions earlier than Stanley's more industrial/commercial focus. Fitch believes the economy is stabilizing, which should lead to improvement in margins on volume growth. In addition, both companies are in similar lines of business and SWK has considerable experience in integrating acquisitions, which should minimize the assimilation of BDK.

SWK has demonstrated conservative financial management over the past decade which is expected to continue. The combined company has strong liquidity and access to capital markets and debt reduction is a primary goal. Leverage, while initially higher because of BDK's outstanding debt, is forecast to decline reasonably quickly and liquidity is and will be strong, particularly with higher than expected cash balances at 2009 year-end for the combined company.

A new 364-day credit agreement combined with existing bank facilities provides $1.5 billion of revolving credit. Cash flow is expected to be significantly higher once transaction and restructuring costs are absorbed, which will be heavier in the first year following the merger.

The above rating actions reflect the application of Fitch's current criteria which are available 'www.fitchratings.com' and specifically include:

--'Rating Hybrid Securities', dated Dec. 29, 2009;

--'Corporate Rating Methodology', dated Nov. 24, 2009;

--'Evaluating Corporate Governance', dated Dec. 12, 2007;

--'Liquidity Considerations for Corporate Issuers', dated June 12, 2007;

--'Short-term Ratings Criteria for Corporate Finance', dated June 12, 2007.

Additional information is available 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.