Frankfurt, July 9, 2002 — Moody’s Investors Service changed the outlook for the Ba1 long-term senior debt ratings of Invensys plc to stable from negative.
The change to a stable outlook reflects Invensys’ proactive approach for liquidity and refinancing issues as it addressed covenant pressure and arranged a replacement for the most immediate short-term debt maturities.
It reflects also the design and implementation of a comprehensive strategic restructuring program, which is expected to improve the group’s profitability and financial profile. Future rating actions will be dependent upon the successful execution over the near term of its de-leveraging strategy through asset sales, the extension of the debt maturities and an enhanced sustainable operating profitability.
Moody’s acknowledged that Invensys has addressed near term covenant pressure and has successfully refinanced GBP959 million of maturing debt with a 364-day bridge facility maturing July 2003 (after a 90-day term-out). This new bridge financing allows the company greater flexibility to implement its restructuring program.
The ratings, however, continue to recognize that Invensys’ financial flexibility remains constrained and that de-leveraging will principally come from selected asset disposals. The agency has taken into consideration that Invensys has to-date completed nearly 50% of its proposed disposal program but Moody’s is cautious that the remaining asset sales may be subject to delay or price dilution given the current economic environment.
Moody’s is also cautious that if Invensys is unable to dispose of assets in a timely manner, the company will need to further extend its debt maturity. The completion of a bond issuance is also important in Invensys refinancing strategy. In addition, the ratings continue to recognize that Invensys relies on the implementation of its new strategy and the completion of its related performance initiatives, which include Customer Development, Lean Supply Chain Management and operational excellence.
As this new strategy includes a major reorganization of its business structure with strict customer orientation, this strategy and its related performance initiatives are well designed to offer substantial potential for recovery beyond the effects of a cyclical upturn.
Invensys plc, headquartered in London, England, is a global electronics and engineering company created by the merger of BTR plc and Siebe plc. The group operates globally through its two core divisions Production Management and Energy Management and a Development division comprising non-core businesses with significant prospects. The group generated sales from core operations of GBP 4.6 billion in its fiscal year ending March 2002.