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Moody's rates American Axle note Ba3
Moody's Investors Service said it assigned a Ba3 rating with a loss-given-default assessment of LGD4 (56%) to American Axle & Manufacturing, Inc.'s $300 million guaranteed senior unsecured notes due 2017, changed the speculative grade liquidity rating to SGL-1 from SGL-2 and revised the loss-given-default rate on the senior unsecured term loan and senior unsecured notes of American Axle and parent company American Axle & Manufacturing Holdings, Inc. to 56% from 57%.
The agency also affirmed American Axle's senior unsecured term loan and senior unsecured notes at Ba3 and American Axle & Manufacturing Holdings' corporate family rating and senior unsecured convertible notes at Ba3.
The outlook is negative.
The agency said that although the company's debt-to-EBITDA ratio will initially increase to 3.5x from 3x as a result of the new debt, its margins, cash flows and coverage ratios should improve during 2007 as a result of restructuring initiatives and employee buy-out programs begun during 2006.
The company's liquidity profile will be strengthened from the combination of retention of a portion of the proceeds as corporate cash, increased availability under its bank revolving credit facility and free cash flow generation, Moody's said.
The negative outlook recognizes the considerable near-term uncertainty posed by the September 2007 expiration of the Big-3 United Auto Workers contract, the possibility of any related strikes or work actions and, due to its significant supply contracts relating to General Motors Corp.'s T900 trucks and SUVs, American Axle's continuing vulnerability to further shifts in consumer preference away from these segments.
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