Fitch puts Parker-Hannifin on negative watch

Fitch Ratings said it placed the long- and short-term ratings for Parker-Hannifin Corp. on Rating Watch negative following news that the company has agreed to acquire Clarcor Inc. for $4.3 billion in cash, including the assumption of net debt.

The agency also said it assigned a long-term issuer default rating of A and short-term issuer default rating of F1.

Fitch said it expects to downgrade Parker-Hannifin's long-term and short-term ratings by one notch when these approvals have been received.

The negative watch reflects the expected increase in Parker-Hannifin's financial leverage, which is expected to remain at historical levels following the acquisition, the agency said.

The company plans to finance the transaction, which is expected to total about $4.5 billion, with about $3 billion of debt and $1.5 billion of cash, Fitch said.

The agency said it expects this incremental debt would drive the company’s debt-to-EBITDA to more than 3x from 2.1x as of Sept. 30.

The ratings consider the company’s strong market positions in diversified end markets and solid operating performance over time, Fitch said.

The ratings also consider the current weakness in Parker-Hannifin's results due to macroeconomic headwinds, particularly in natural resource markets, the agency said.

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