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Moody's Downgrades Stanley Works

The Associated Press

PITTSBURGH (AP) — Moody's Investors Service on Thursday downgraded credit and debt ratings of Stanley Works Co., citing sales declines across most of the tool maker's businesses and weak earnings.

The agency lowered Stanley Works' senior unsecured credit rating to an investment grade "A3" from "A2," its commercial paper rating to "Prime-2" from "Prime-1" and its junior subordinated debt to "Baa2" from "Baa1."

The downgrade affects about $1.6 billion of debt securities and reflects "revenue and volume declines across most lines of business, earnings weakness, and decline in several key credit metrics," according to the agency.

In January, the company reported its fourth-quarter profit plunged 94 percent, hurt by a large restructuring charge, and as revenue fell 4 percent.

Moody's said Stanley Works' rating outlook was stable, presuming stability and growth in the company's security businesses partially offsets declines in its tool businesses, and that cost cuts ease top line pressures.

Moody's expects continuing economic problems and low consumer and business confidence will hurt Stanley's construction and do-it-yourself business, which makes hand tools and other products, as well as its industrial division.

The company's security business may prove more resilient, the agency said, but "it too may face diminished new installation demand driven by slowing commercial construction."

Moody's said Stanley Works' adjusted debt burden has nearly doubled over the past five years as it aggressively grew through acquisitions and repurchased shares. At the same time, its revenues grew by about 50 percent, the agency said.

While that growth strategy diversified the company's business lines and geographic reach, it also left Stanley Works' rating vulnerable in the current downturn, according to Moody's.

Shares of Stanley Works rose 57 cents to $31.80 in afternoon trading.