Research Update: 3M Co. Ratings Placed On CreditWatch Negative Following Proposed Health Care Spin And Subsidiaries' Bankruptcy Plan

On July 26, 2022, 3M Co. announced its intention to spin-off its health care segment into an independent, publicly traded entity. As part of the proposed transaction, 3M will receive a dividend as well as a 19.9% stake in the stand-alone health care company. Simultaneously, the company announced that its Aearo Technologies subsidiaries filed for Chapter 11 bankruptcy to satisfy claims regarding its Dual Ended Combat Arms Earplugs Version 2, as well as certain respirator mask liabilities. 3M has committed $1 billion to fund a trust to satisfy claims and an additional $240 million for related expenses. As a result of these announcements, S&P Global Ratings is placing all ratings on 3M Co. on CreditWatch with negative implications. The CreditWatch

...- On July 26, 2022, 3M Co. announced its intention to spin-off its health care segment into an independent, publicly traded entity. - As part of the proposed transaction, 3M will receive a dividend as well as a 19.9% stake in the stand-alone health care company. - Simultaneously, the company announced that its Aearo Technologies subsidiaries filed for Chapter 11 bankruptcy to satisfy claims regarding its Dual Ended Combat Arms Earplugs Version 2, as well as certain respirator mask liabilities. 3M has committed $1 billion to fund a trust to satisfy claims and an additional $240 million for related expenses. - As a result of these announcements, S&P Global Ratings is placing all ratings on 3M Co. on CreditWatch with negative implications. - The CreditWatch reflects our view that the legacy materials science company will be less diversified without the higher growth health care segment, with a lower EBITDA base and lower absolute free cash flow generation. Also, it will be more vulnerable...

Research Update