Check out L-3 Communications (NYSE:LLL). They are in the middle of executing a publicly traded spin-off called Engility. Since L-3 considers itself a 1st-tier defense contractor and has an investment grade rating, it will spin-off a subsidiary that is to be a 2nd/3rd tier company. Therefore the new spin-off will carry a debt rating equivalent to a BB+ enterprise. A lot of debt & goodwill will be transferred to the resultant subsidiary.
In contrast, the parent company will retain all the revenues, dividends and cash-flow. It will reduce capital expenditures, and possibly R&D. Long term debt will be spun-off as L-3 will maintain its excellent credit ratings. The margins are expected to grow in the parent company and decrease in the spin-off. However, the synergies and cost savings are expected to help both companies. How will all the re-alignments of business units wash-out?
L-3 Annual meeting is April 24th. If everything goes according to plan, the deal is to be finished by June 30th, 2012.
Engility website: http://www.engilitycorp.com//news/