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Fitch Affirms Whirlpool's IDR at 'BBB' Following the Settlement of Brazilian Collection Dispute

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  Published in House and Home on Thursday, June 23rd 2011 at 7:31 GMT by Market Wire
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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed Whirlpool Corporation's (NYSE: WHR) ratings, including the company's Issuer Default Rating at 'BBB' following the announcement that its Brazilian subsidiary has reached an agreement to settle all claims related to a longstanding dispute in Brazil with BancoSafra S.A. This dispute relates to a $25 million unauthorized loan entered into in 1989 by an employee of Embraco (which subsequently became a part of Whirlpool's Brazilian subsidiary). A Brazilian trial court entered a final and non-appealable judgment against the company in 2000.

A full list of ratings follows at the end of this press release. The Rating Outlook is Stable.

Whirlpool's subsidiary agreed to settle with BancoSafra S.A. for 959 million Brazilian reais (equivalent to approximately US$603 million). The payment will be made in two installments: the first installment for 469 million reais (equivalent to roughly US$295 million) is planned for the third quarter of 2010 and the second installment of 490 million reais (equivalent to approximately US$308 million) is planned for the first quarter of 2012. This settlement amount is within the range of previously disclosed accrual and previously disclosed maximum exposure, which as of March 31, 2011, could have been as high as US$1.1 billion. The agreement is subject to the approval of the Brazilian court, which is expected to consider and approve the settlement in the next 30 days.

While the settlement amount is significantly larger than the US$164 million accrued by the company as of March 31, 2011, the rating affirmation acknowledges that Whirlpool has sufficient cash to meet the settlement payment without increasing debt levels. Whirlpool had cash of US$1.02 billion at March 31, 2011. In addition, Fitch believes that the company will have sufficient free cash flow (cash flow from operations less capital expenditures and dividends) in 2011 to cover the first installment of the settlement agreement. Fitch anticipates the company will continue to have sufficient liquidity, supported by its US$1.35 billion revolving credit facility. The rating affirmation also reflects the elimination of a major uncertainty regarding the company's ongoing regulatory and legal issues.

Fitch currently rates WHR as follows:

Whirlpool Corporation

--Long-term IDR at 'BBB';

--Short-Term IDR at 'F2';

--Commercial paper at 'F2';

--Senior unsecured notes at 'BBB';

--Bank revolving credit facility at 'BBB' (Whirlpool Corp., Whirlpool Europe B.V., Whirlpool Finance B.V. and Whirlpool Canada Holding Company as borrowers).

Maytag Corporation

--Long-term IDR at 'BBB';

--Senior unsecured notes at 'BBB'.

Whirlpool Finance B.V.

--Short-Term IDR at 'F2';

--Commercial paper (CP) at 'F2'.

Additional information is available at '[ www.fitchratings.com ]'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 13, 2010);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007.

Applicable Criteria and Related Research:

Corporate Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646 ]

Liquidity Considerations for Corporate Issuers

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666 ]

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