Fitch puts Eaton on watch

Fitch Ratings said it placed the ratings for Eaton Corp. on Rating Watch negative following the company's announcement that it plans to acquire two companies, the Moeller Group and Phoenixtec, in separate transactions totaling $2.8 billion. Eaton intends to fund the acquisitions through an unspecified combination of cash, debt and equity.

Ratings on watch include the company's A issuer default rating, A senior unsecured bank facilities, A senior unsecured debt rating, F1 short-term issuer default rating and F1 commercial paper.

The agency said the negative watch reflects the inherent risks of integrating the planned acquisitions, financing risks related to completing the transactions and uncertainty about economic conditions, particularly in the United States, that could potentially pressure future margin improvement and expected cash flow.

Despite these rating issues, Fitch said it anticipates Eaton will continue to maintain conservative financial policies and that it is committed to funding the acquisitions with a sufficient portion of equity to support existing ratings.

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