Fitch Affirms Black & Decker's Rating; Outlook Remains Positive.

NEW YORK -- Fitch Ratings has affirmed its ratings on The Black & Decker Corporation (BDK) and Black & Decker Holdings Inc. The Rating Outlook remains Positive.

Fitch affirms the following ratings on BDK and Black & Decker Holdings Inc:

--Issuer Default Rating at 'BBB';

--Bank credit facility at 'BBB';

--Senior unsecured notes at 'BBB';

--Commercial paper at 'F2'.

Fitch's ratings apply to BDK's $700 million senior unsecured debt, Black & Decker Holdings' $300 million senior unsecured debt, BDK's and Black & Decker Holdings $1 billion revolving bank credit facility and BDK's and Black & Decker Holdings Inc.'s $1 billion commercial paper program.

The ratings reflect: sustained improvement in financial protection measures; strong and improving market positions; completion of the restructuring plan begun in late 2001, which has led to strengthening profit margins and less vertical manufacturing integration; innovative and successful product introductions, particularly in power tools and accessories; continued productivity improvements, which have helped to mitigate rising raw material costs; and a demonstrated ability to integrate acquisitions. In addition, the company has generated sizeable free cash flow, which has been used to finance acquisitions and share repurchases.

BDK did lower its leverage in 2003 after reaching relatively high levels earlier in the decade and has proceeded to keep leverage on a cash flow basis at relatively strong levels. The balance sheet is strong despite borrowing $565.6 million to repatriate $888.3 million under the American Jobs Creation Act. Most of this borrowing is expected to be repaid within 2-3 years. As of July 2, 2006, balance sheet debt was lower by $292 million to $1.46 billion from 2005 year-end levels and cash balances totaling $322 million. Leverage and interest coverage, as measured by free cash flow (FCF)/total adjusted debt and EBITDA/interest, were at 19.5% and 10.3 times (X), respectively, for the latest 12 month period ended July 2, 2006.

The ratings also consider BDK's strong brands particularly in its power tools and accessories segment, broad geographic diversity, and significant new product development. Of concern is the weakening of new home building and the home repair/remodeling market. Commercial building remains strong. The recent pause in the Federal Reserve actions regarding short-term interest rates could prove positive but the overall direction for home related activity in 2006 is down.

Acquisition and stock repurchase activity, which has been heavy over the past two years, has not resulted in any deterioration in financial strength to date. Stock repurchases have been ambitious amounting to $494 million through Aug. 10, 2006 and $526 million in 2005. Further stock repurchases are expected in 2006, which could affect debt levels.

The expectation remains that BDK will be judicious regarding its balance sheet, but stock repurchases will be aggressive. Bolt on acquisitions and stock repurchases are expected to be completed without a material impact on leverage for a sustained period of time and to be primarily funded with internally generated funds. Management has been prudent in the past and is expected to reduce stock repurchases when acquisitions are to be completed or if the operating environment changes dramatically.

At the 'BBB' level, there is room for additional leverage. The Rating Outlook remains Positive because of this latitude and expectations that the company's manufacturing repositioning and inventory controls will allow it to sustain relatively strong measures in a moderate economic downturn.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.