Fitch Rates Agilent's Proposed $500MM Sr. Unsecured Debt Offering 'BBB-'; Outlook Stable.

CHICAGO -- Fitch Ratings has assigned a 'BBB-' rating to Agilent Technologies, Inc.'s (Agilent) (NYSE: A) proposed $500 million senior unsecured debt offering due 2017. Fitch currently rates Agilent as follows:

--Issuer Default Rating (IDR) at 'BBB-'; and

--Senior unsecured revolving credit facility at 'BBB-'.

The Rating Outlook is Stable.

Fitch anticipates the company will use net proceeds for general corporate purposes, including potentially funding amounts remaining under the company's current share repurchase authorization, which Fitch estimates was approximately $686 million as of July 31, 2007. As of July 31, 2007 and pro forma for the expected $500 million debt issuance, Fitch estimates Agilent's net cash position was approximately $1.5 billion and leverage (total debt to operating EBITDA) less than 2.5 times (x) (0.6x after factoring out the $1.5 billion of debt obligations related to the company's wholly-owned operating subsidiary, Agilent Technologies World Trade, Inc. (ATWT)). As a result, Fitch believes the company has sufficient capacity for additional share repurchase activity and/or acquisitions approximating annual free cash flow, which Fitch expects to remain consistently in excess of $500 million.

The notes are expected to be pari passu to all future unsecured and unsubordinated debt, including the company's existing $300 million senior unsecured credit facility. However, the proposed debt is expected to be structurally subordinated to the aforementioned $1.5 billion of debt obligations owed to a third-party by ATWT, which are collateralized by preferred stock in a wholly-owned subsidiary holding approximately $1.6 billion of restricted cash and cash equivalent.

Additionally, Fitch anticipates the indenture related to the proposed debt will contain negative covenants, including limitations on liens, sale and leasebacks, and consolidations, mergers, and asset sales. Aside from customary limitations, the company is expected to be permitted to:

--incur liens of up to 15% of net tangible assets (including liens related to sales and leasebacks) estimated to be approximately $383 million as of July 31, 2007; and

--enter into sale and leaseback transactions provided the net proceeds are used for debt reduction or reinvested within 270 days.

The notes are also anticipated to include a change of control provision whereby holders are entitled to put the notes back to the company at 101% of face value plus accrued and unpaid interest in the event of a change of control, including the accumulation of more than 50% of Agilent's voting stock.

At July 31, 2007 and pro forma for the proposed debt issuance, Fitch believes Agilent's liquidity position was solid and supported by:

--approximately $2.0 billion of unrestricted cash, a substantial amount of which was located outside the U.S.;

--the undrawn $300 million senior unsecured revolving bank credit facility expiring March 11, 2012, the credit agreement for which contains a $200 million accordion feature; and

--Fitch's expectations for consistent annual free cash flow in excess of $500 million (free cash flow was $840 million for the latest 12 months ended July 31, 2007).

Additionally, at July 31, 2007 Agilent had approximately $1.6 billion of restricted cash and cash equivalents related to the ATWT debt.

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