Moody's rates Delco Remy notes

Moody's Investors Service said it took the following rating actions in conjunction with Delco Remy International Inc.'s proposed refinancing of certain of its existing debt obligations (aggregating about $250 million plus fees) with two new notes issuances.

Moody's assigned B1 rating to Delco Remy's proposed $125 million of guaranteed second-priority senior secured floating-rate notes due 2009 and assigned a B3 rating to Delco Remy's proposed $150 million of guaranteed senior unsecured subordinated notes due 2012.

Moody's also affirmed the B3 rating of Delco Remy's $165 million of 11% guaranteed senior subordinated global notes due May 2009, the B2 rating for the $145 million 8.625% guaranteed senior unsecured notes due December 2007, the B1 senior implied rating and the B3 senior unsecured issuer rating.

The outlook is negative.

Moody's said the ratings actions reflect that despite very significant business restructuring and consolidation measures implemented by Delco Remy during 2003, the company remains highly leveraged with only moderate cash interest coverage. Total debt/EBITDA approximated 5.5x (before including preferred stock as debt) for the four-quarter period ended December 2003, and EBIT coverage of cash interest was only 1.5x.

The ratings more favorably reflect Delco Remy's implementation of major structural cost reductions during 2003, including the successful closing of its last North American UAW facility in Anderson, Indiana. At this point, the company has transitioned the majority of its production capacity to lower-cost countries, including Mexico, Hungary and China.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.