Research Update: 3M Ratings Lowered To 'A-' On Announced Settlement; Ratings Remain On CreditWatch

On June 22, 2023, 3M Co. announced it reached a settlement to resolve PFAS-related litigation with the public water systems across the U.S. for up to $12.5 billion over a 13-year period. In the second quarter of 2023, 3M will take a pre-tax charge of $10.3 billion, which equals slightly less than the last two years of the company's net income. Based on these liabilities, we estimate rolling-12-month (RTM) leverage would increase to about 3.2x, above our prior expectations. Therefore, we are lowering our rating on 3M Co. to 'A-' from 'A'. We are lowering our short-term ratings on 3M to 'A-2' from 'A-1'. The ratings remain on CreditWatch with negative implications. At this time, the CreditWatch reflects the proposed

...- On June 22, 2023, 3M Co. announced it reached a settlement to resolve PFAS-related litigation with the public water systems across the U.S. for up to $12.5 billion over a 13-year period. - In the second quarter of 2023, 3M will take a pre-tax charge of $10.3 billion, which equals slightly less than the last two years of the company's net income. - Based on these liabilities, we estimate rolling-12-month (RTM) leverage would increase to about 3.2x, above our prior expectations. - Therefore, we are lowering our rating on 3M Co. to 'A-' from 'A'. We are lowering our short-term ratings on 3M to 'A-2' from 'A-1'. The ratings remain on CreditWatch with negative implications. - At this time, the CreditWatch reflects the proposed separation of the health care business, which the company expects to happen in late 2023 or early 2024. It also reflects the evolving proceedings around the world with respect to PFAS, as well as 3M's Combat Arms Earplugs Version 2. While we believe the settlement with...

Research Update