2009-12-16 16:21:19 -

Fitch Ratings expects to assign an 'A' rating to Sherwin-Williams' (NYSE:SHW) proposed offering of $500 million of senior unsecured notes due 2014. The new issue will be ranked on a pari passu basis with all other senior unsecured debt, including the company's revolving credit facilities. Proceeds from the notes offering will be used to repay a portion of the company's short-term debt and for general corporate purposes.

Fitch currently rates Sherwin-Williams as follows.

--Issuer Default Rating (IDR) 'A';

--Senior unsecured debt rating 'A';

--Revolving bank credit facilities 'A';

--Commercial Paper 'F1';

--Short-term IDR 'F1'.

The Rating Outlook is Stable.

The rating and Outlook for SHW are based on the company's leading market position in

the architectural coatings industry, the company's unique distribution platform, the breadth and depth of its product offerings, the company's focus on painting contractors and property maintenance managers, solid free cash flow generation and strong management team.

Risk factors include lead-based paint litigation cases involving SHW, the effects of the sluggish housing, home improvement and commercial market sectors on the company's architectural paint segment, volatile raw material costs and the company's relatively aggressive growth strategy.

The rating also takes into account the cyclicality of SHW's end markets.

Residential, commercial and industrial construction are each cyclical and can be influenced by economic trends. SHW's historic relative stability of earnings has been driven by its diversification; historically, weakness in residential demand has been largely offset by commercial/industrial strength and/or repair and remodel spending. This has not been the case in 2009, wherein most of SHW's end-markets are in decline simultaneously, although at different stages of correction. Home improvement spending is projected to fall by 8.3% in 2009 (the third consecutive year of decline) but is anticipated to improve 3.5% next year. A pick-up in home sales, particularly in existing home sales, combined with a strengthening economy should lead to higher spending on home renovations in 2010. Recent statistical and anecdotal information point to a bottom for U.S. housing, though early-stage recovery will be more muted than average. Fitch projects total housing starts to fall 41.4% in 2009 and increase 15.1% in 2010 to 610,000 homes. During the first 12-15 months from this bottom, the recovery may appear jaw-toothed as substantial foreclosures now in the pipeline present as distressed sales, and as meaningful new foreclosures arise from Alt-A and option adjustable-rate mortgage resets. Commercial construction started to weaken earlier in 2009, and the rate of decline is expected to intensify next year. Fitch currently projects private non-residential construction spending (as measured by the Census Bureau) to decline 10% in 2009 and 14.5% in 2010.

SHW has demonstrated that it is capable of managing working capital and lowering expenses to generate strong cash flow and build liquidity during periods of economic pressure. SHW's credit metrics and cash flow generation continue to be strong despite the sharp drop in revenues during 2009. Revenues for the nine months ended Sept. 30, 2009 are down $784.5 million or 12.5% compared with the same period last year.

Leverage as measured by the ratio of debt to earnings before interest, taxes, depreciation and amortization (EBITDA) as calculated by Fitch remains below 1.0 times (x) for the latest 12 months (LTM) from Sept.

30, 2009, consistent with the levels achieved during the past three fiscal years. FFO adjusted leverage was 2.7x for the LTM from Sept. 30, 2009, flat compared to fiscal year 2008. Interest coverage was 20.6x for the Sept. 30, 2009 LTM period, compared with 16.2x during 2008 and 16.8x during 2007. FFO interest coverage was 17.5x during the LTM period versus 12.9x for 2007 and 2008. Currently, cash flow generation is at its highest level with free cash flow of $644.8 million for the LTM from Sept. 30, 2009. Free cash flow totaled $593.9 million in 2008, $546.3 million in 2007 and $470.5 million in 2006. This surplus cashflow has allowed the company to fund certain acquisitions and stock repurchases.

Through the first nine months of 2009, SHW repurchased 4.9 million shares of its common stock for approximately $276.2 million. This compares to about $379.9 million in share repurchases during the same period in 2008. Fitch believes that the company will continue to be disciplined in its uses of cash, balancing share repurchases with acquisition opportunities. SHW maintains ample liquidity with cash of $32.8 million and $665 million of availability under the commercial paper program that is backed by the company's revolving credit agreements as of Sept. 30, 2009.

Founded in 1866, The Sherwin-Williams Company is one of the world's leading companies engaged in the manufacture, distribution, and sale of coatings and related products to professional, industrial, commercial and retail customers. The company is structured in three business segments: the Paint Stores Group (61% of 2008 sales), the Consumer Group (16%), and the Global Group (23%). The Paint Stores Group is the exclusive North American distributor of Sherwin-Williams branded paints and related products. The Consumer Group sells paints, coatings and related products under various branded names (Dutch Boy, Pratt & Lambert, Martin-Senour, Thompson, Minwax, etc.); licensed products (Martha Stewart); and private labels (Wal-Mart, Sears). The Global Group develops, manufactures, distributes and sells a variety of paint and coatings products worldwide

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Fitch RatingsRobert Rulla, CPA, +1-312-606-2311 (Chicago)Robert
Curran, +1-212-908-0515 (New York)Cindy Stoller, +1-212-908-0526
(Media Relations, New York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com