Fitch Upgrades Tyco International - Analyst Blog

International Credit Rating Agency, Fitch Ratings, upgraded the long-term investment-grade credit rating for Tyco International Ltd (TYC). to "A-" from "BBB+" and retained a stable outlook on the same.

This enhancement in credit ratings is the result of Tyco's low gearing, operational improvements, prudent cash use and good source of liquidity. This will enable reduction of interest rates on the company's long-term debt.

Tyco fulfills a wide range of the diverse needs of businesses and governments, educational and medical institutions, and commercial industries, ranging from food to automobiles. It also boasts of leading brand names for products and services under Flow Control, Fire Protection Services, Safety Products and Electrical & Metal Products.

We are bullish on the company's fortunes based on the relative stability of global security and fire markets, high and predictable cash generation, limited balance sheet risk, and easy cost-out opportunities. There is a potential catalyst in the company's solid balance sheet and healthy liquidity position. The company's positive operating performance is commendable despite accelerating weakness in global non-residential construction and project-related end-markets.

The company's business strategy includes acquiring companies and making investments that complement its existing businesses. These acquisitions and investments may fail to generate the desired outcome and lead to waste of significant resources, which would adversely affect its operating results.

The company continues to be subject to a number of lawsuits stemming from the actions of its former senior management. Adverse outcomes of these matters could impact its financial condition, operations or cash flows. Material adverse legal judgments, fines, penalties or settlements could adversely affect its financial health and prevent it from fulfilling obligations under its outstanding debt.

Based in Pembroke, Bermuda, Tyco International Ltd. operates in 60 countries and manufactures security products and services, fire protection and detection products and services, valves and controls, and other industrial products. Major competitors of Tyco are General Electric Co. (GE), Honeywell International Inc. (HON) and United Technologies Corp. (UTX).

We currently have an 'Underperform' recommendation on Tyco International Ltd.

 
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