Fitch Rates Whirlpool's Proposed $650MM Sr. Unsecured Notes Offering 'BBB'; Outlook Stable

Fitch Ratings has assigned a 'BBB' rating to Whirlpool Corporation's (NYSE:WHR) proposed offering of $650 million aggregate amount of senior unsecured notes. The new offering will be equal in right of payment with all other senior unsecured debt.

Whirlpool intends to use the proceeds from the notes offering to repay commercial paper borrowings, which replaced amounts borrowed under its long-term revolving credit facility to fund the purchase of shares of Indesit Company S.p.A. (Indesit).

INDESIT AND HEFEI ACQUISITIONS

On Oct. 14, 2014, Whirlpool completed the acquisition of majority ownership of Indesit. The company now has 60.4% ownership of Indesit, representing a 66.8% voting stock in the company (including the treasury shares held by Indesit). The total acquisition price at the dates of the three purchase agreements was $965 million ($75 million for Ms. Claudia Merloni's 4.4% stake in Indesit acquired on July 17, 2014; $680 million for 42.7% stake of Fineldo S.p.A. acquired on Oct. 14, 2014 and $210 million for the 13.2% stake of certain members of the Merloni family's acquired on Oct. 14, 2014).

Whirlpool funded the acquisition with borrowings under its long-term credit facility. The company subsequently borrowed under its CP program to repay the revolver borrowings. The company intends to repay a portion of the short-term borrowings with the proposed notes issuance.

Whirlpool will now commence the steps to launch a mandatory tender offer for the remainder of Indesit's outstanding shares, with the intention to delist the company. The tender offer purchase price per share is equal to about $13.89 per share (based on the exchange rate as of Sept. 30, 2014). The company expects to complete the tender offer no later than the first quarter of 2015.

On Oct. 24, 2014, Whirlpool's wholly-owned subsidiary, Whirlpool (China) Investment Co., Ltd., completed its acquisition of a 51% equity stake in Hefei Rongshida Sanyo Electric Co., Ltd. The aggregate purchase price was RMB 3.4 billion (approximately $551 million based on the exchange rate as of Sept. 30, 2014). Whirlpool funded the acquisition with a combination of cash and other debt financing.

SOLID LIQUIDITY POSITION

As of Sept. 30, 2014, Whirlpool had cash of $987 million and no borrowings under its $2 billion long-term revolving credit facility that matures in 2019 and its $1 billion 364-day revolving credit facility that matures in September 2015. At the end of 3Q'14, Whirlpool had $460 million outstanding under its commercial paper program.

A majority of the company's cash is held in foreign countries (approximately 95% of cash as of Dec. 31, 2013 was held overseas). WHR's intent is to permanently reinvest these funds outside the U.S. and the company's current plans do not demonstrate the need to repatriate these funds to support U.S. operations.

RATING AFFIRMATION

On Oct. 22, 2014, Fitch affirmed the ratings of Whirlpool following the completion of its acquisition of 60.4% ownership of Indesit.

The rating affirmation and Stable Outlook reflects Fitch's expectation that debt to EBITDA will settle at around 1.5x - 2.0x and interest coverage will be above 9.0x within 12-24 months following the completion of the acquisitions of Indesit and Hefei.

Fitch estimates that the company's debt to EBITDA will approximate 2.0x and funds from operations (FFO) adjusted leverage will be 3.5x by year-end 2015. Interest coverage is projected to be approximately 10.0x at the conclusion of 2015.

Fitch expects the company will reduce leverage in 2016, with debt to EBITDA projected to be about 1.5x, FFO adjusted leverage situating at 3.0x and interest coverage above 10.0x at the end of 2016.

RATING SENSITIVITIES

While Fitch does not expect a global economic downturn during the next 12 months, the company's risk profile is somewhat heightened by the significant debt incurred for the acquisition of Indesit as well as the acquisition of a 51% equity stake in Hefei. Negative rating actions may be considered if there is significant deterioration in global demand and consequently the company's operating performance, Whirlpool undertakes shareholder friendly activities funded by debt, and/or there is material judgment against the company related to existing regulatory proceedings, leading to leverage levels consistently exceeding 2.5x and interest coverage falling below 5.5x.

While unlikely in the next 12 months, positive rating actions may be considered if the company's financial performance is meaningfully better than Fitch's base case forecast, particularly debt-to-EBITDA consistently situating within a range of 1.0x - 1.5x and interest coverage sustaining above 10x, as Whirlpool continues to maintain a solid liquidity position.

Fitch currently rates Whirlpool as follows:

Whirlpool Corporation

--Long-term Issuer Default Ratings (IDR) 'BBB';

--Short-term IDR 'F2';

--Commercial paper 'F2';

--Senior unsecured notes 'BBB';

--Bank revolving credit facility 'BBB'.

Maytag Corporation

--Long-term IDR 'BBB';

--Senior unsecured notes 'BBB'.

Whirlpool Finance B.V.

--Short-term IDR 'F2';

--Commercial paper 'F2'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=911534

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