Fitch cuts Delphi, rates loan BB-

Fitch Ratings said it assigned Delphi Corp. a BB- rating to its indicative senior secured bank facility and downgraded the senior unsecured rating to B from BB- and trust preferred rating to CCC+ from B.

The Rating Watch remains negative.

Fitch said its rating actions reflect the pending $2.75 billion senior secured bank facility, the subordination of the unsecured and trust preferred debtholders, declining General Motors' production volume, and the resulting losses from Delphi's high fixed-cost structure, incremental raw material costs, and significant cash requirements arising from restructuring, pension, and health care.

As a result, Fitch expects negative free cash flow to persist through 2005 and 2006, resulting in significant balance sheet deterioration.

Offsetting these issues are Delphi's success at garnering new business from customers other than GM and from non-automotive markets and a two-tier wage and benefit labor agreement, as well as the potential for the disposition of assets from the Automotive Holdings Group, Fitch added.

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