Fitch Ratings Affirms Honeywell at 'A+'.

CHICAGO -- Fitch Ratings has affirmed ratings on Honeywell International Inc's (HON) debt as follows:

--Senior unsecured debt 'A+';

--Bank credit facilities 'A+';

--Commercial paper 'F1'.

The Rating Outlook is Stable. Approximately $5.7 billion of debt is covered by the ratings.

The ratings consider HON's geographic and product diversification, leading market positions and technology portfolio, strong cash flow and liquidity. The company continues to refine its business portfolio, having acquired Novar in March 2005 and divested several non-core businesses during the past 18 months. HON's operating performance and cash flow are currently supported by favorable economic conditions across many of its businesses. The benefits of HON's ongoing productivity efforts also support the company's ratings.

Rating concerns include HON's exposure to cyclicality inherent in a number of its businesses, especially aerospace, which is susceptible to market shocks. HON also faces lingering asbestos litigation, a risk that is mitigated by insurance coverage. The company's credit statistics remain low relative to similarly rated companies, and the purchase of Novar has increased HON's net debt position. However, total debt is expected to decline during late 2005 or early 2006 when the company plans to use its cash balances to reduce debt by as much as $1 billion from the level reported at the end of 2004. The ratings incorporate Fitch's expectation for a gradual decline in HON's liabilities for asbestos and other environmental liabilities as well as further improvement in the company's cash flow from operations and related credit statistics. Though not anticipated by Fitch, adverse developments pertaining to several risks could potentially result in a review of the ratings and outlook. These risks include weaker than expected operating cash flow, substantial expenditures for acquisitions or share repurchases, an inability to resolve asbestos claims, and delays/failure in selling the Novar assets.

The reduction in HON's liquidity that resulted from the Novar acquisition has been partly offset by stronger operating results, particularly in the commercial aerospace business, and HON recently increased its estimate for free cash flow before dividends in 2005 to $1.7 billion. HON's use of cash in recent periods been substantial with respect to pension contributions, net asbestos payments, restructuring, environmental payments, and share repurchases. However, such cash requirements appear likely to decline after 2005 and should facilitate a modest level of acquisitions and further debt reduction.

HON's previous contributions to its pension plans have helped control its net pension liability, and much of the company's major restructuring is behind it, although modest restructuring activity is likely to continue, including the current reorganization of HON's aerospace segment that is anticipated to cost $60-$80 million. Net asbestos payments are forecast to peak in 2005 at $500-$600 million and to decrease thereafter. These expenditures, together with ongoing environmental remediation costs, dividends and share repurchases, are manageable given HON's solid free cash flow.

Liquidity at June 30, 2005 was $2.6 billion, consisting of $1.9 billion in cash and $2.3 billion of credit facilities, offset by $1.6 billion of short-term debt and current maturities as well as letter of credit usage under the bank facilities. HON's financial flexibility with respect to its use of cash will benefit during the last half of 2005 when it repatriates approximately $2.5 billion of foreign earnings (net of taxes) under the American Jobs Creation Act of 2004. In addition, cash proceeds from the prospective sale of Novar's aluminum and check printing businesses, estimated by HON at $1.0-$1.5 billion, would support HON's ability to pay down debt while leaving HON with ample liquidity.

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.