Fitch Ratings rates Eaton's debt high

CHICAGO (AP) - Fitch Ratings on Tuesday reiterated its debt ratings and outlook on Eaton Corp., but said the industrial manufacturer's recent acquisitions have driven its debt somewhat high.
Fitch presently rates the company's issuer default rating, senior unsecured bank facilities and senior unsecured debt at "A". Fitch rates its commercial paper at "F1". The outlook is stable.
Fitch said it views Eaton's leverage as somewhat high for the rating category, but added that the ratings assume the company will use its free cash flow to control debt and leverage over the long term. Eaton has exercised disciplined financial policies in the past and it has the capacity to reduce debt quickly in the absence of major acquisitions or share repurchases, Fitch noted.
In addition, Fitch said Eaton has successfully integrated previous acquisitions and continues to realign its business portfolio to reduce its exposure to the cyclical truck and automotive markets. Those factors help offset rating concerns about competitive environments in many of its markets, as well as an expected downturn in the truck segment in 2007.
Eaton's most recent acquisition activity came on Thursday, when it announced plans to acquire privately held AT Holdings Corp., parent company of aerospace supplier Argo-Tech Corp., for $695 million. Argo-Tech makes fuel pumps and systems for aerospace engines and airframes, as well as fueling systems for commercial and military aerospace markets.
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