Moody's rates Delphi loan B2

Moody's Investors Service said it assigned a provisional B2 (LGD3, 47%) rating to Delphi Corp.'s $2 billion first-lien secured term loan B-2 and affirmed the company's provisional corporate family and probability-of-default ratings at B2, its $825 million second-lien term loan at provisional B3 (LGD4, 65%) and its speculative-grade liquidity rating at SGL-2.

The agency also revised the ratings assigned to Delphi's $1.5 billion first-lien secured term loan B-1 and Delphi Holdings Luxembourg Sarl's $200 million euro-denominated first-lien term loan B-1 to provisional Ba2 (LGD2, 17%) from provisional Ba3 (LGD2, 26%) after the loan amounts were revised from $2.95 billion and the equivalent of $750 million, respectively.

The outlook is stable.

The actions follow revisions to Delphi's financing arranged for its planned emergence from Chapter 11 bankruptcy protection. While the total amount of the first-lien term loan is unchanged at $3.7 billion, it will now be separated into a senior tranche (B-1) for $1.7 billion and a junior tranche (B-2) for $2 billion.

The agency said the provisional B2 corporate family rating reflects the magnitude of the company's debt upon emergence, weak but improving coverage over the intermediate term as the anticipated benefits of restructuring initiatives take hold and the absence of free cash flow in its initial year after emergence.

The rating recognizes substantial improvements in the company's cost structure and operational efficiencies achieved during its period of bankruptcy reorganization and ongoing benefits from its global scale and manufacturing footprint, Moody's added.

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