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Fitch places MGIC’s ratings on negative; Actuant reorganizes business segments; MMAC economic indicators continue to decline; Johnson Controls to raise cash by selling additional securities

Fitch places MGIC’s ratings on negative

Fitch Ratings has placed MGIC Investment Corp. and its subsidiaries on its negative rating watch list.

MGIC’s long term issuer default rating has been rated BBB-; its $200 million in senior notes due on Sept. 15, 2011 are rated BBB-; its $300 million in senior notes due on Nov. 1, 2015 are also rated BBB-; and its $390 million in convertible junior subordinated debentures due in 2063 are rated BB.

“(Last week’s) rating action results from MGIC Investment’s decision to defer interest payments on its $390 million convertible junior subordinated debentures due 2063,” Fitch Ratings said in a release. “The ‘BB’ rating assigned to the convertible junior subordinated debt reflected Fitch’s view of MGIC Investment’s liquidity pressures and the risk that MGIC Investment would exercise its option to suspend payments. Notwithstanding, the announced deferral on $390 million of MGIC Investment’s debt obligations is an indicator of the increasing financial pressure facing the company and the mortgage insurance sector as a whole.”

Actuant reorganizes business segments

Butler-based Actuant Corp. announced Monday that the company’s financial reporting segments are being modified to reflect changes in the portfolio due to acquisitions, as well as business reporting lines.

The company’s former industrial segment is being divided into two reporting segments, industrial and energy, to provide additional transparency to its growing energy-related businesses.

The new industrial segment includes Enerpac, Simplex, Milwaukee Cylinder, Precision Sure-Lock and TT Fijnmechanica (TTF).

The energy segment will consist of the Hydratight joint integrity business and the recently acquired Cortland rope and cable business.

The electrical segment is virtually unchanged from the company’s previous segment reporting, except for the addition of the Turner Electric business from the previous Engineered Products segment.

The former engineered products and actuation systems segments, with the exception of Turner Electric, will be combined into the new engineered solutions segment.

MMAC economic indicators continue to decline

All but three of the 21 local economic indicators tracked by the Metropolitan Milwaukee Association of Commerce deteriorated in January compared with a year ago, reflecting the deep recession.

"The employment situation in the metro area took a steep turn downward in 2008’s final

two months and now into early 2009," said Bret Mayborne, economic research director for the MMAC. "Over this time period job losses accelerated and the unemployment rate moved sharply upwards, giving pause to any suggestion of a short-term turnaround."

Some of the key indicators for the month included:

  • Nonfarm employment levels fell at a 2.8-percent pace in January. Overall, metropolitan Milwaukee has lost 23,300 jobs over the past 12 months.
  • Seven of 10 major industry sectors registered January job losses compared with a year ago. The educational & health services sector, up 3.1 percent from over year ago, posted the largest percentage increase. The largest sector decrease of 15 percent came in the construction, mining & natural resources sector.
  • New car registrations fell 28 percent.
  • The number of unemployed in metro Milwaukee rose against year-ago levels for the fourth consecutive month, up 49.1 percent to 56,200.
  • Existing home sales numbered 470 in the metro area for January, a 14.4-percent fall from year-ago levels. Likewise, mortgages recorded in Milwaukee County fell 27.4 percent from one year ago.
  • Air passenger usage at General Mitchell International Airport fell 18.3 percent in January to 487,279.
  • The value of signed construction contracts, as reported by F.W. Dodge for December, was $26.7 million, down 74.7 percent from December 2007.

Johnson Controls to raise cash by selling additional securities

Johnson Controls Inc. plans to sell more than $500 million in new securities to shore up its credit and general operations.

The Milwaukee-based company intends to use the net proceeds from the offerings for general corporate purposes, including the repayment of short-term indebtedness that the company has incurred to finance its working capital requirements.

J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch & Co. are serving as joint book-running managers for the offerings, and Barclays Capital Inc. is acting as a joint book-running manager for the convertible senior notes offering.

Johnson Controls recently announced a joint venture to produce the batteries for Ford Motor Co.’s new hybrid vehicles.

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