Moody's lowered its outlook on Switzerland-based ABB Ltd. to negative from stable following the company's announcement that it will sell 80.1% of its power grids business to Japanese conglomerate Hitachi Ltd.
Stephan Wulf, a Moody's vice president, senior analyst, and lead analyst for ABB, said the nature of the transaction signals a shift toward more shareholder-centered policies.
The deal, the proceeds from which are earmarked for ABB's shareholders, will reduce the company's revenues and earnings, according to Moody's.
"Thus ABB's leverage will remain elevated with adjusted Debt/EBITDA of currently 2.4x on the last twelve months basis ended September 2018, well above our downgrade trigger of 2x," the rating agency said.
"[T]o avoid a downgrade, ABB is required to improve its credit metrics back towards the requirements for the A2 rating category driven by performance improvements of its remaining core business or a more balanced financial policy," Wulf said.
As part of the ratings action, Moody's affirmed ABB's long-term issuer rating at A2 and short-term issuer rating at P-1.