Some Disassembly Required

ITT’s Colleen Ostrowski helped position the company’s defense and water units for success as stand-alones.

Colleen Ostrowski, treasurer and vice president of investor relations at $2 billion ITT Corp., recently helped achieve what some in her organization, including Ostrowski herself at times, thought might be impossible—carving three investment-grade companies out of the legacy $11 billion diversified manufacturer within one year.

Over the course of 2011, ITT shunted its defense and water businesses into separate companies, Exelis and Xylem, and emerged a trimmer company with four never-before combined business lines that manufacture products for the energy, aerospace, and transportation industries, among others. At the end of the year, each of the three companies had an investment-grade rating as a result of Ostrowski’s careful oversight of structure and balance sheet.

The successful spinoff is one of the accomplishments Ostrowski is proudest of. She also counts it among her greatest learning experiences, because it showed her the structure and strengths of each business and allowed her to communicate that to the investment community. That experience in taking a lead role in communicating with the rating agencies and investors led to Ostrowski’s taking on an additional role in investor relations this year.

Tell me more about the process of spinning off the defense and water businesses.
It was a very complicated process, and a time-constrained one, to spin out the defense and water businesses. We entered the year hoping to complete the process in less than a year, from announcement to close, and we did so. From the beginning, we had the dictate that we were going to create three balanced, attractive companies. And one of the ways we were measuring that was the investment-grade ratings.

I was responsible for recommending how we should split the assets and liabilities for the three companies. And in determining how best to present these companies to the rating agencies, we decided that it made sense for the defense business, which deals primarily with government contracts, to take on the large pension plan, and we would close it to the commercial businesses, the water and the ITT businesses. It also made sense that given the type of business the water business was going to be, because of their good cash flow in the U.S., they took on the financial debt. And with ITT being the legacy business, even though we were the smallest, we kept the legacy liabilities, asbestos and environmental. That’s how we balanced the liabilities, and we were able to achieve investment-grade ratings for all three. That was a real achievement, and that got us off to a good start.

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