Moody's downgrades Hillenbrand

Moody's Investors Service said it downgraded Hillenbrand, Inc.'s senior unsecured issuer rating to Baa3 from Baa2 due to its pending acquisition of K-Tron, which is expected to close in early April and be financed through a combination of revolver borrowings, monetization of some assets and existing cash.

The outlook is stable.

The agency said the downgrade reflects its view that the K-Tron acquisition increases Hillenbrand's risk profile because the company is acquiring a more cyclical, non-death-care-related company yet is still very modest in size.

Hillenbrand's Baa3 rating benefits from strong operating margins, a leading market position in the death-care industry, stable and predictable cash flows and increased product diversification following the K-Tron acquisition, Moody's said.

The principal constraints to the rating are some cyclicality in K-Tron's processing business, the combined company's modest size, questions about the synergies Hillenbrand will be able to achieve from the acquisition and the company's penchant for returning about half of its free cash flow to shareholders, the agency said.

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