Fitch Rates Black & Decker's $300MM Senior Unsecured Notes 'BBB'

Business Wire, Nov 13, 2006

NEW YORK -- Fitch Ratings has assigned a 'BBB' rating to The Black & Decker Corporation's (BDK) $300 million, ten year notes due 2016. These notes contain added protection for bondholders in the form of a change of control provision, which has not been in previous debt offerings. The provision provides for the redemption of the notes at 101% if a transaction results in a person becoming the beneficial owner, directly or indirectly, of more than 50% of BDK's voting stock, measured by voting power rather than number of shares, and the rating on the notes is lowered to non-investment grade as a result of the change in control.

Proceeds from this issuance will primarily be used to repay short-term debt. The Rating Outlook is Positive.

Fitch currently rates BDK as follows:

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

-- Bank credit facility 'BBB';

-- Senior unsecured notes 'BBB';

-- Commercial paper 'F2'.

Fitch's ratings apply to BDK's $700 million senior unsecured debt, Black & Decker Holdings' $300 million senior unsecured debt, BDK's and Black & Decker Holdings $1 billion revolving bank credit facility and BDK's and Black & Decker Holdings Inc.'s $1 billion commercial paper program.

BDK's financial profile remains solid and credit metrics strong for the rating category despite a more difficult U.S. economic environment in 2006, aggressive share repurchases and near term concerns related to the U.S. housing and the home improvement industry.

As it prepares for slowing business conditions, the company has:

-- demonstrated its ability to control capital requirements, including limited use of working capital and slightly lower capital expenditures in 2006;

-- implemented costs controls, and;

-- initiated price increases to offset significant raw material cost pressure.

Over the last 12 months, share repurchases approximating $1 billion have been completed with a minimal impact on credit protection measures. For the latest 12 months ended Oct. 1, 2006, EBITDA interest coverage was almost 10x (times), EBITDA/total debt was 1.7X and free cash flow/total adjusted debt (adjusted for operating rents) was 21%. However, cash, which had risen to $968 million at year-end 2005 due to borrowing $565.6 million to repatriate $888.3 million, is now down to $262 million.

BDK's performance through nine months ended Oct. 1, 2006 has essentially been flat with revenue up 1% to $4.8 billion and operating income gaining 2% to $587 million. All of the revenue gain has come from Vector Products, Inc., a company acquired on Mar. 1, 2006, as unit volume growth was flat and pricing was a negative 1%. Limiting growth was weakness in sales of certain products, including generators and pressure washers, which had strong volume in the prior year. The company has experienced a softening in demand since the second quarter of 2006 and rising commodity costs have limited any gains in profit margins. The Outlook for the remainder of the year is for continuing pressure on sales despite price increases as organic sales growth is anticipated to decline. In addition, these pricing actions, though broad based, will not offset anticipated fairly heavy raw material costs in the fourth quarter. However, in 2007, increased prices combined with productivity improvements are expected to largely offset lingering higher costs related to raw materials.

The weakening in new home building and the slowdown in home repair/remodeling market are concerns going into 2007. As of now, commercial building activity appears to be maintaining its growth. With an authorization to purchase an additional 3 million shares bringing the outstanding authorization to 4.9 million shares, stock repurchase activity will be closely watched. At the 'BBB' level, there is room for additional leverage, but a combination of debt financed share repurchases along with a major deterioration in industry fundamentals could have negative rating implications.

For further information, see the press release 'Fitch Affirms Black & Decker's Ratings; Outlook Remains Positive' dated Aug. 18, 2006 available on the Fitch Ratings web site at www.fitchratings.com.

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