Fitch affirms Spectrum

Fitch Ratings said it affirmed Spectrum Brands Inc.'s ratings following news that the company will acquire Stanley Black & Decker's hardware and home improvement group for $1.4 billion in cash.

The acquisition is expected to be debt financed and finalized by the end of the company's second quarter subject to customary closing conditions.

The ratings affirmed include Spectrum's long-term issuer default ratings at BB-, $300 million senior secured revolving credit agreement at BB-, $370 million senior secured term loan at BB-, $950 million 9½% senior secured notes at BB- and $300 million 6¾% senior unsecured notes at BB-.

The outlook is stable.

This is clearly a leveraging transaction with opening day debt-to-adjusted EBIDTA increasing to 4.6x from an estimated 3.4x at end of September, Fitch said.

Nonetheless, the affirmation is supported by Spectrum's solid track record of improving margins, low single-digit organic growth rates since 2009, ample levels of free cash flow and higher margins and additional free cash flow to be garnered from the newly acquired group, the agency said.

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