DBRS Confirms Honeywell Ratings at “A” and R-1 (low)

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Debt rating of Honeywell International Inc. (Honeywell or the Company) at “A.” DBRS has also confirmed Honeywell’s Short-Term Debt rating at R-1 (low). All trends remain Stable. DBRS has also discontinued the ratings of Honeywell ASCa Inc., Honeywell Aerospatiale Inc. and Honeywell Limited/Honeywell Limitée after the Company requested that they be withdrawn. Today’s action, despite the higher gross debt level compared to F2015, reflects the Company’s solid business strengths, a financial risk profile that is currently only slightly weaker than the Company’s overall rating, and DBRS’s expectation that operating cash flows and earnings growth will improve coverage metrics in the near term. The rating remains underpinned by the breadth and depth of the Company’s product and service offerings to a variety of attractive end markets, its innovative culture and technological capacity, and world-class operations. Honeywell is also managing structural challenges such as exposure to cyclical end markets, risks associated with expansion into Emerging Markets and volatile raw materials costs.

In 2016, Honeywell faced a challenging operating environment due to weakness in key end markets such as business jets and gas processing. However, conditions were more favourable toward the end of the year, and the Company has performed well across all business segments during H1 2017, supported by contributions from key acquisitions. From a credit perspective, the most significant event during the LTM H1 2017 period was the significant increase in debt, as Honeywell refinanced certain borrowings with new debt issues at lower interest costs and added additional debt. Although this notably weakened financial metrics, DBRS views this as temporary and expects coverage metrics to improve as the Company continues to grow organically and via acquisitions. In addition to contributing cash flows and earnings, DBRS expects acquisitions to continue to bolster Honeywell’s business risk profile going forward. DBRS projects that the financial risk profile will make progress toward metric ranges consistent with the current rating.

Even at the current leverage level, the rating is well supported due to the strength of the business risk profile. A particularly severe market downturn that substantially weakened financial metrics from their current levels, and/or a large-scale debt-financed acquisition could lead DBRS to consider a negative rating action. Sustained deleveraging, along with demonstrable business risk improvement could lead to a positive rating action over time.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodology is Rating Companies in the Industrial Products Industry, which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.