Moody's eyes Spectrum Brands for upgrade

Moody's Investors Service said it placed the ratings of Spectrum Brands, Inc. under review for upgrade, including the company's senior unsecured notes rating of B2 and the senior secured revolving credit facility and term loan ratings of Ba1.

Spectrum plans to sell its hardware & home improvement segment for $4.3 billion in cash to ASSA Abloy.

The company plans to use a portion of the proceeds estimated at $3.5 billion to repay debt with a target gross leverage ratio of 2.5x compared to 3.7x as of June 2021 (company calculated). “In conjunction with the transaction, Spectrum is reducing its long-term net debt to adjusted EBITDA target to 2x-2.5x from a prior range of 3x-4x and Moody's views this as a reduction in governance risk. Additionally, the company plans to invest for organic growth, fund complimentary acquisitions, and return capital to shareholders,” the agency said in a press release.

In the review, Moody's said it will focus on Spectrum’s strategic operating focus including the trajectory for earnings for the remaining business segments following the loss of scale and diversity, its new capital structure and free cash flow outlook following the completion of sale and debt repayment and the planned use of proceeds including the business risk associated with potential future acquisitions.

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