DuPont won 'high-stakes game of chicken,' but Peltz still foxing around
S&P threatens a rate cut if DuPont keeps giving cash to shareholders instead of paying down debt
Despite DuPont Co. shareholders' refusal to elect directors backed by billionaire activist Nelson Peltz and his Trian Fund Management, Standard & Poor's is still weighing "at least a one in three chance" that it will cut the Wilmington manufacturing conglomerate's credit ratings, SUP analyst analyst Paul J. Kurias warned investors in a report today.
That's because Kurias still sees "the potential of a protacted battle" between Peltz and DuPont, and the company will be tempted to do more to raise cash for shareholders fast -- which DuPont can't afford, according to Kurias: "DuPont has little cushion" to borrow or give away more, given it scurrent high debt levels for a company with its A rating.
DuPont CEO Ellen Kullman may have "played a high-stakes game of chicken and won," but DuPont hasn't yet disclosed how many votes its contested directors lost, writes Carol Levenson, analyst at Gimme Credit LLC. "If Mr. Peltz believes that he has received any kind of a shareholder mandate, we expect him to continue" asking for "more radical shareholder enhancement actions."
It's bad enough that DuPont is using its $4 billion Chemours spinoff, not to pay down debt as originally expected, but by giving it to shareholders, these bond people say. More pressure from Peltz and other dissidents will likely pressure Kullman "to do bondholder unfriendly things," Levenson concludes.