Fitch Ratings has removed the ratings for Tyco International Ltd. (Tyco; NYSE: TYC) and Tyco International Finance S.A. (TIFSA) from Rating Watch Evolving and affirmed the long-term Issuer Default Rating (IDR) at 'A-' and short-term IDR at 'F2'. The Rating Outlook is Stable. TIFSA is a wholly owned direct subsidiary of Tyco International Ltd. which guarantees TIFSA's debt. A full list of Fitch's rating actions is provided near the end of this release.

The rating actions reflect Tyco's solid credit metrics, consistent operating performance, and Fitch's expectation that the company's financial profile will remain stable upon completion of its planned spin-offs of the ADT North America Residential (ADT) and Flow Control (Flow) businesses by the end of September 2012. After the separation, Tyco will consist of its Fire & Security business. TIFSA will continue to be a direct subsidiary of Tyco. Tyco's leverage following the separation could be slightly lower than historical levels which would provide flexibility to address any unforeseen operating or organizational issues without affecting the rating. Tyco plans to have approximately $1.5 billion of debt at separation which Fitch estimates will translate to debt/EBITDA of roughly 1.0 times (x).

The ratings are subject to completion of the spin-offs consistent with terms previously communicated by Tyco, including a reduction in debt to be funded by special dividends and repayment of intercompany debt from ADT and Flow as part of the separation process. After the separation, outstanding debt at ADT will be approximately $2.5 billion, while Flow will have approximately $275 million of debt, net of cash. Tyco's total consolidated debt at March 31, 2012 totaled $4.1 billion. The ratings are also subject to Fitch's final review of sharing agreements for taxes and other liabilities. ADT will operate as an independent company following the separation. Flow will be acquired by Pentair Inc. immediately after it is spun off.

Tyco will continue to have a global presence, strong market shares, solid cash flow, and low leverage after the separation. Service revenue, which represents slightly less than half revenue in the Fire & Security business, is relatively stable and should mitigate cyclicality in the installation business. Additional restructuring, including the consolidation of numerous locations, should support a gradual improvement in profitability. The company can also be expected to focus on expanding in emerging markets, growing the attractive services business, and improving project selectivity.

Tyco's Fire & Security business is expected to generate annual revenue of roughly $10 billion. The business sells into a wide range of end markets with the largest concentrations in retail, commercial, and industrial markets which comprise roughly 40% of total revenue. A sizeable portion of service revenue is recurring, consisting of maintenance work and security monitoring services. Recurring revenues tend to be fairly stable through the business cycle and provide support for the company's financial results. The combination of the fire and security businesses will allow further consolidation where locations overlap, leaving room for margin expansion. Some operational offices will be replaced by new research and development centers to support internal growth.

Fitch expects the Fire & Security business to generate sufficient cash to fund capital expenditures around 4% of revenue, much of which will be used to expand into strategic markets. Free cash flow should also be sufficient to fund moderate bolt-on acquisitions which could occur as the industry gradually consolidates.

Rating concerns include protracted weakness in non-residential construction activity and execution risks regarding the separation. Some of ADT's and Fire & Security's operations are integrated, and separating the operations could create distractions or have a negative impact on near term results. However, the separation is occurring at a deliberate pace and Tyco successfully executed a previous separation in 2007. Tyco's product business sells some products to ADT, but typically at arm's-length which reduces the risk of a disruption in revenue. Non-residential construction, which represents nearly 35% of total revenue in the Fire & Security business, appears to have stabilized but remains at low levels.

Concerns also include contingent liabilities. Remaining tax liabilities related to IRS audits have been reserved for, but cash outflows could still be significant. The company will retain a majority of other contingent liabilities including asbestos and environmental liabilities, with Flow Control assuming the remainder. Future asbestos claims are partially offset by insurance assets, and environmental liabilities are not expected to be material. Tyco will also retain the majority of pension obligations. Net pension obligations, excluding amounts to be assumed by ADT and Flow, totaled $517 million ($325 million U.S., $192 million international) as of Sept. 30, 2011. U.S. plans were approximately 62% funded as estimated by Fitch.

The ratings or outlook could be revised upward if Tyco performs effectively as a smaller company and shared contingent liabilities remain manageable. Fitch expects Tyco to generate solid cash flow after the separation and maintain strong metrics. The ratings or outlook could be negatively affected if global economic conditions worsen materially, particularly in the non-residential construction sector. The ratings could also be negatively affected if the new management team were to materially alter its financial or operating strategies.

Tyco's liquidity at March 31, 2012 included $1 billion of cash and $1.5 billion of bank credit facilities, offset by only $3 million of debt due within one year. After the separation, Tyco's liquidity should continue to be sufficient to support its operations and financial obligations. The company intends to maintain a minimum cash balance of $300 million along with a targeted revolving credit facility of $750 million which would back commercial paper.

Fitch has affirmed the ratings for Tyco as follows:

Tyco International Ltd.

--IDR at 'A-';

--Senior unsecured notes at 'A-';

--Short-term IDR at 'F2'.

Tyco International Finance S.A.

--IDR at 'A-'

--Senior unsecured revolving credit facilities at 'A-';

--Senior unsecured notes at 'A-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

Additional information is available at www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Fitch has conducted a Rating Assessment Service for Tyco.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology', Aug. 12, 2011;

--'Parent and Subsidiary Rating Linkage, Aug. 12, 2011.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

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