Black & Decker shifting to long-term debt

April 02, 2009|By Lorraine Mirabella | Lorraine Mirabella,lorraine.mirabella@baltsun.com

Power tool maker Black & Decker Corp. said Wednesday it is moving to replace its short-term debt with higher-interest long-term debt in light of the recession and recent ratings downgrades.

The Towson company floated a $350 million bond offering this week with interest of 8.9 percent. It plans to use net proceeds primarily to pay down $283 million in existing commercial paper and revolving credit borrowings carrying a much lower average interest rate of 2.9 percent, according to documents filed with the U.S. Securities and Exchange Commission.

The offering, expected to net about $343.1 million, is part of "an effort we've been making over the last year, given this environment, to move from short-term to longer-term" debt, said Roger Young, a company spokesman. "Because our debt has been downgraded by Moody's in recent months, that makes it more challenging to place commercial paper. We're trying to maintain better liquidity and take a more conservative financing position."

The bond offer contains a provision that calls for the company to repurchase the notes at a 1 percent premium in case of a change of control, a provision the company said it has used in the past to protect investors.

Black & Decker has been the subject of market speculation in recent days that named Danaher, a Washington-based medical and industrial manufacturer, as a possible buyer. Black & Decker had no comment on the rumors, and a Danaher spokesman did not return phone calls. Analysts dismissed the speculation as highly unlikely.

Nicholas P. Heymann, who follows the company's stock for Sterne, Agee & Leach in New York, said the decision to replace short-term debt is dictated by a need to raise long-term cash as Black & Decker's automobile-related business deteriorates.

The company's Emhart division, which sells fasteners for chrome and other car parts, makes up about a sixth of Black & Decker's sales and more of its profits, Heymann said.

Baltimore Sun reporter Jay Hancock contributed to this article.

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