Moody's eyes Emerson for downgrade

Moody's Investors Service said it placed Emerson Electric Co.'s A2 senior unsecured debt rating under review for downgrade.

Emerson’s decision to sell a majority stake in its climate technology business to funds managed by Blackstone Inc. for pretax proceeds of about $9.5 billion prompted the review, Moody’s said. Emerson will keep a minority stake in the stand-alone venture, which is expected to close in its fiscal year 2023.

“The review reflects Moody's expectations that, barring a concomitant reduction in debt, Emerson's leverage will substantially increase because of the loss of earnings associated with the climate technologies business. This segment contributed over 26% of Emerson Electric's total revenue and segment earnings in the company's fiscal year ending Sept. 30, 2022,” the agency said in a press release.

The review will focus on the company's pro forma leverage and free cash flow after dividends following the divestiture, and the ability and likelihood for debt reduction in the first few years after the close, Moody’s said.

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