S&P gives Otis unit notes BBB

S&P said it assigned a BBB issue-level rating to the planned senior unsecured notes issued by Otis Worldwide Corp.'s subsidiary Highland Holdings Sarl.

Otis intends to use the proceeds to finance its acquisition of the 49.98% ownership interest in joint-venture Zardoya Otis SA that it does not already own.

“Although the proposed notes are being issued by the company's subsidiary that holds its European operating assets, we do not believe the issuance is large enough to significantly subordinate the existing unsecured debt issued by Otis Worldwide Corp, thus our issue-level ratings are unchanged,” S&P said in a press release.

The acquisition will likely increase Otis' S&P Global Ratings-adjusted debt to EBITDA to 3x or slightly higher at close, which S&P said it expects will occur by the end of the second quarter of 2022.

“However, we believe the company will suspend share repurchases, at least through next year, which we forecast will help it reduce debt leverage sustainably below 3x by the end of 2022,” the agency said.

S&P said its issuer credit rating and outlook on Otis Worldwide are unchanged.

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