EnPro Industries Inc.

S&P Global Ratings' stable outlook on EnPro reflects our expectation that the company will maintain adjusted leverage of less than 4x throughout the economic cycle, including acquisition activity and shareholder rewards. We could lower our rating on EnPro if debt-funded acquisitions and share repurchases or operational underperformance cause the company's adjusted debt to EBITDA to approach 4x. Although less likely given EnPro's relatively high exposure to cyclical end markets, we could raise our rating on the company if it continued to expand into less-cyclical businesses, lowering the risk of a potential deterioration in its cash flow and leverage during recessionary periods. In addition, we would expect the company to maintain leverage of less than 3x throughout the business cycle, even

...We believe EnPro Industries Inc. will continue to demonstrate financial policy consistent with the rating while executing its portfolio reshaping strategy. EnPro will likely continue to acquire businesses, such as NxEdge, that focus on end markets with a higher growth than more mature industries. At the same time, EnPro may continue to divest the least profitable portions of its business. Although the $850 million acquisition pushes S&P Global Ratings-adjusted debt to EBITDA above 3.5x on a pro forma basis, we expect EnPro would look to reduce leverage below 3x over the next 12 months, which would give the company ample cushion to keep leverage below 4x, even through a cyclical downturn. We expect the company will eschew significant acquisitions and share buy-backs until this occurs. During fiscal 2020, EnPro fully repaid outstanding borrowings under its $400 million revolving credit facility using the proceeds from the Fairbanks Morse divestiture. Altogether, divestiture proceeds more...

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