Rating Action: Moody’s assigns Baa1 ratings to Eaton’s new senior unsecured notesGlobal Credit Research – 16 Aug 2022New York, August 16, 2022 — Moody’s Investors Service (“Moody’s”) assigned a Baa1 rating to Eaton Corporation’s (“Eaton”) new senior unsecured notes due 2033 and 2052. The issuance maturing 2033 are sustainability-linked notes. The issuances do not impact Eaton’s other ratings, including the existing Baa1 senior unsecured ratings. The ratings outlook is stable.The following summarizes today’s rating actions:Assignments:..Issuer: Eaton Corporation….Senior Unsecured Regular Bond/Debenture, Assigned Baa1RATINGS RATIONALEEaton’s ratings are supported by its stature as a highly-diversified manufacturer with significant scale at approximately $20 billion in revenues and strong profitability across all of its key business segments. Although recent spending on working capital due to inflation and supply chain challenges as well as order growth are constraining cash generation in 2022, Moody’s expect the company to resume free cash flow in excess of $1 billion annually starting in 2023. As Eaton has demonstrated a commitment to sustaining a relatively strong credit profile, we expect that the company will use free cash generation to repay short term debt while pursuing a modest pace of acquisitions and share repurchases. The company reported over $1.3 billion of commercial paper outstanding as of June 30, 2022. Debt-to-EBITDA as of June 30, 2022 was 2.8x. If Eaton uses free cash generated over the next 18 months to repay a substantial portion of the short-term debt outstanding, Moody’s believes that leverage can fall below 2.5x over that period.Proceeds from the notes issuances will be used to redeem the company’s outstanding 2.75% senior notes due 2022 and for general corporate purposes.The new 2033 notes offering contains sustainability-linked bond features. Per terms of the notes, interest expense will increase by as much as 25 basis points if the company does not meet certain Sustainability Performance Targets as defined in its Sustainability-Linked Bond Framework.The stable ratings outlook reflects Moody’s expectation that Eaton will sustain EBITA margins in the 16-17% range on strong organic revenue growth through 2023.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSEaton’s ratings could be upgraded if, after repayment of short-term debt, the company employs fiscally conservative financial policies, including the prioritization of capital deployment towards planned acquisitions rather than shareholder returns, with no material increase in debt. The company would also need to demonstrate that it can maintain free cash flow-to-debt consistently in excess of 10% and debt-to-EBITDA of 2.5x or below.Ratings could be downgraded if Eaton encounters a significant decline in revenue or demand characteristics in major markets without a corresponding reduction in its cost base. Lower ratings could also be considered in the event of a sizable debt-funded acquisition or shareholder distribution, resulting in debt-to-EBITDA sustained above the mid-3x level, or if EBITA margins are expected to decline to the low-teens percentage range.Eaton Corporation, headquartered in Ireland with offices in Cleveland, Ohio, is a diversified industrial company. The company operates in five segments: Electrical Americas, Electrical Global, Aerospace, Vehicle and eMobility. Revenue is approximately $20 billion.The principal methodology used in these ratings was Manufacturing published in September 2021 and available at https://ratings.moodys.com/api/rmc-documents/74970. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. David Berge, CFA Senior Vice President Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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