Toronto, June 22, 2012 -- Moody's Investors Service upgraded Flowserve Corporation's ("Flowserve") senior secured bank facility rating to Baa3 from Ba1. As Flowserve is now an investment grade issuer, Moody's withdrew the company's Ba1 corporate family rating, Ba2 probability of default rating, and SGL-1 speculative grade liquidity rating. The company's ratings outlook is stable. This concludes the review for possible upgrade initiated on June 1, 2012, triggered by the company's announcement that it had endorsed a capital structure strategy.

RATINGS RATIONALE

Darren Kirk, a vice president with Moody's, said, "Flowserve's ratings upgrade is supported by the clarity of its capital structure strategy and our expectation that the company will maintain its adjusted Debt/ EBITDA between 1.5x and 2.5x through the economic cycle." Kirk added, "as well, we expect Flowserve will maintain good liquidity as it implements its recently announced $1 billion stock repurchase program."

Flowserve's Baa3 rating reflects its strong market position within the fragmented flow control industry (pumps, valves and seals) where its products and services are sold into an assortment of end markets globally. Flowserve has meaningful exposure to infrastructure spending cycles, however demand for its products is balanced between both short and long cycle projects, which is reflected in its advance order book, while another 40% of its revenue is derived from its steady and high-margin aftermarket service business. Moody's expects that Flowserve will achieve modest earnings growth and over $300 million of free cash flow over the next year, supported by improvements in recent working capital inefficiencies. While this could enable Flowserve's adjusted Debt/ EBITDA to reduce from 1.2x currently, Moody's expects implementation of the company's sizeable share repurchase program will steadily increase its adjusted Debt/ EBITDA to between 1.5x -- 2.5x, consistent with its stated capital structure target range. Flowserve is also likely to pursue acquisitions, although any such activity is expected to be bolt-on in size and financed within the bounds of the above-noted leverage expectations.

Flowserve's bank facility is currently secured by the pledge of shares in certain of its subsidiaries. The facility includes a fall away provision for the security should Flowserve attain investment grade ratings from both Moody's and S&P. In any event, Moody's expects that, over time, Flowserve will seek to structure its debt on a senior unsecured basis, as is already the case with the $250 million 364 day bridge loan (unrated) it obtained on June 14, 2012 to help fund its share repurchase program.

The stable outlook reflects Moody's view that Flowserve's rating is unlikely to change within the next 12 to 18 months as debt capacity is expected to be consumed by shareholder returns and/or acquisition activity.

Flowserve could be further upgraded should the company demonstrate commitment to its new capital structure policy and maintain good liquidity as it pursues its growth objectives and shareholder return initiatives. Quantitatively, adjusted Debt/ EBITDA sustained towards 2x and FFO/ Debt sustained above 35% would support a higher rating. A downgrade could occur should debt-financed acquisitions or higher than expected return of cash to shareholders result in adjusted Debt/ EBITDA sustained above 3x and FFO/ Debt below 20%.

The principal methodology used in rating Flowserve Corporation was the Global Manufacturing Industry Methodology published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Irving, Texas, Flowserve Corporation is a leading provider of pumps, valves and mechanical seals as well as related services to various end markets globally. Revenue for the last twelve months ended March 31, 2012 was $4.6 billion.

REGULATORY DISCLOSURES

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Darren M. Kirk VP - Senior Credit Officer Corporate Finance Group Moody'sCanada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635Donald S. Carter, CFA MD - Corporate Finance Corporate Finance Group(416) 214-1635 Releasing Office: Moody's Canada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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