The risk of liquidity is a not a major concern for the U.S. industrial sector as many companies have manageable debt maturities over the next few years, according to a Fitch Ratings report. These companies also took advantage of favorable credit conditions during first half (1H) 2007 to extend debt maturities and credit facility expirations.

Operating cash flow for industrial issuers has been supported by a generally solid economy and strong demand in certain sectors such as energy and aerospace, offsetting any impact of the weakness in the homebuilding and automotive sectors that has occurred over 2007. The ongoing challenges in the credit markets do not warrant any changes in Fitch's credit profiles for most issuers, at least in the intermediate term.

"Industrial issuers have little direct exposure to subprime and other structured finance assets," said Eric Ause, Senior Director, Fitch Ratings. "The primary threat for industrials is the indirect risk related to investor confidence and its effect on liquidity being supplied to the market."

One modest concern is that many of the lower-rated industrial companies have low free cash flow and cash balances, meaning that a high percentage of available liquidity comes from credit facilities. Fitch considers these to be a less reliable source of liquidity than internally generated funds.