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Technitrol Surges After Analyst Upgrades

The Associated Press

NEW YORK (AP) — Shares of Technitrol Inc. bucked the broader market's downdraft Wednesday after a Wall Street analyst upgraded his rating on the stock because the maker of engineered electronics components appears poised to significantly cut its debt.

CL King analyst Michael W. Gallo upgraded the shares to "Accumulate" from "Neutral" after the Philadelphia company said Tuesday it was selling its Denmark-based Medtech components unit to a private equity fund for $200 million.

Technitrol said the sale will allow it to trim its interest expense on outstanding debt by roughly $2 million and immediately improve its debt-to-EBITDA ratio, referring to earnings before interest, taxes, depreciation and amortization. That ratio is often a critical component of debt covenants.

Technitrol also said its bank lenders agreed to alter terms on its senior credit line so the company could sell more assets and speed debt repayments.

"We believe this represents a significant positive for Technitrol as it presents an opportunity for the company to reduce its debt load and significantly reduce its leverage ratio," Gallo wrote in a client note.

"This transaction will also essentially bring to a close the troubled history of Technitrol's prior ($385 million) acquisition of Sonion, which led to the balance sheet being overleveraged at the time of the acquisition."

By midday Wednesday, shares were up 52 cents, or 10.3 percent, at $5.55. That follows a 26 percent gain the day before.

Meanwhile, the broader S&P 500 index had fallen 1.5 percent Wednesday as data on U.S. factory orders and the services industry missed expectations.