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Tyco given boost by Moody's

Tyco's reputation moved a step closer to respectability after Moody's, the ratings agency, affirmed the long and short-term debt ratings of Tyco International, giving a Baa3 rating to its £1 billion revolving credit facility and changed its ratings outlook to positive from stable. Strong cash flow is cited as one of the main reasons for the positive outlook combined with proceeds from the sale of a number of key assets.

?Continued operating improvements, strong cash flow generation and further debt reduction would be viewed favourably,? notes the ratings agency. ?More specifically, free cash flow-to-adjusted debt in the 20%-25% range, return on assets approaching 10% and debt-to-EBITDA strengthening to less than two times, combined with the resolution of ongoing investigations and legal matters within the $3 billion threshold, could result in a favourable rating action prior to the company's fiscal year end (September 30th).

?On the other hand, a divergence from the current strategy of emphasizing organic growth and debt reduction, a significant decline in operating performance and cash flows, along with adverse litigation decisions against the company in excess of the $3 billion threshold could have a stabilizing impact on the rating/outlook.?

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