| USA. Moody's Investors Service raises Cummins Inc. debt rating to investment grade status |
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| Thursday, 11 May 2006 | |
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Company news: Moody's Investors Service has raised its senior unsecured rating on Cummins Inc. to investment grade status. In raising the rating to Baa3, from Ba1, Moody's cited the Company's "more robust business model and financial structure," which it says improve Cummins ability to perform well through the entire business cycle. This is the second time in eight months that Moody's has raised Cummins credit rating. Standard & Poor's also raised Cummins (NYSE:CMI) to investment grade status in July 2005. In its report today, Moody's - which gave Cummins a 'stable' outlook - noted that the Company's focus on reducing its cost structure and the negotiation of long-term supply contracts better position it to weather the expected short-term drop in North American heavy-duty engine sales in 2007 as a result of the new EPA emissions regulations that take effect Jan. 1. Additionally, Moody's noted that Cummins has "continued to strengthen its product and geographic diversification," citing the Company's medium and light-duty engines, power generation, components and distribution operations as examples. As Cummins financial performance has improved, reducing debt has been a central part of the Company's efforts to strengthen its balance sheet. Cummins reduced its long-term debt by more than $290 million in 2005. In an announcement prior to its annual shareholders meeting today, Cummins said it will redeem $300 million worth of convertible cumulative quarterly income preferred securities (also known as QUIPS) on June 15, 2006 - the first call date. Those actions, combined with a previously announced plan to retire $250 million in high-yield notes in December 2006, will have reduced Cummins long-term debt by more than $800 million since the beginning of 2005. Cummins recently reported strong first quarter earnings and raised its earnings guidance for 2006 to $12.40-$12.60 a share - up from its previous guidance of $11.90 - $12.10. |
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