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Fitch Removes Johnson Controls From Rating Watch Negative; Affirms IDR at 'BBB'; Outlook Negative
Friday, July 24, 2009 2:06 PM


(Source: Business Wire)trackingFitch Ratings has affirmed the Issuer Default Rating (IDR) and long-term ratings for Johnson Controls, Inc. (JCI) at 'BBB'. The short-term ratings have been affirmed at 'F2'. In addition, Fitch has removed JCI's ratings from Rating Watch Negative. The Rating Outlook is Negative.

Fitch has affirmed the following ratings:

JCI

--IDR at 'BBB';

--Senior unsecured credit facilities at 'BBB';

--Senior unsecured long-term debt at 'BBB';

--Equity units convertible on March 31, 2012 at 'BBB-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

York International Corp.

--IDR at 'BBB';

--Senior unsecured long-term debt at 'BBB'.

As of June 30, 2009 JCI had approximately $4.8 billion of outstanding debt, including $450 million of equity units to which Fitch has assigned 100% equity credit.

The removal of JCI's ratings from Watch Negative reflects lower event risk for JCI following the exits from bankruptcy of Chrysler and GM in June and July 2009. JCI is more diverse than a number of other automotive suppliers; its Automotive Experience (AE) segment has typically represented less than a third of JCI's total segment profit, and AE's exposure to the Detroit Three in North America is relatively modest. JCI's battery business sells into the automotive market but three fourths of battery sales are to the aftermarket that provides some stability. There are still significant concerns about JCI's exposure to the automotive industry including low production volumes in Europe and North America, distressed suppliers, and industry restructuring, but the risk of a sudden, industry-wide disruption has declined. JCI continues to work with its supplier base to manage financial or production problems that may arise, and its previous Plastech acquisition provides capacity to bring work in-house as needed. In addition, JCI has recovered all amounts owed by Chrysler and GM, reducing liquidity concerns.

The Negative Outlook incorporates ongoing challenges in JCI's AE business, expectations for weak demand in the company's non-residential construction markets through 2010, elevated leverage, and margin pressure related to lower sales volumes across most of JCI's businesses. The large decline in North American automotive production appears to have stabilized but there are still concerns about longer-term production levels in Europe where temporary incentive programs to replace inefficient cars have obscured actual demand.



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