Moody's rates Accuride loan B2, B3, raises outlook

Moody's Investors Service assigned a provisional B2 rating to Accuride Corp.'s proposed $50 million three-year guaranteed senior secured first-lien revolving credit facility due 2006 and a provisional B3 rating to its proposed $190 million four-year guaranteed senior secured silent second-lien term loan due 2007. It also assigned a B2 rating to Accuride's existing $96 million guaranteed senior secured first-lien term loan C maturing January 2007 which was not previously rated and confirmed Accuride's existing bank credit facilities at B2 and $189.4 million non-guaranteed senior subordinated notes due February 2008 at Caa1. Moody's also raised the outlook to stable from negative.

Moody's said the ratings factor in Accuride's improved operating margins and rising market shares, which have been achieved over the past year despite prolonged industry weakness across most of the company's end markets.

Moody's said the ratings continue to reflect that Accuride remains highly leveraged with marginal EBIT interest coverage. The company operates within extremely cyclical end markets that have not yet recovered from one of the deepest and longest downturn in history.

The severity of the heavy-duty truck and trailer downturns is attributable to a combination of the economic downturn which began during 2001, the subsequent concerns regarding terrorism and uncertainty regarding the world's geopolitical situation, and the fact that the industry has only recently recovered from the 1999 and 2000 Class 8 overbuild that was fueled by aggressive OEM financing programs.

The company depends on major customers, and the loss of any one of its significant customers could have an adverse effect on its business. Accuride derived approximately 19.2%, 16.6% and 13.2% of 2002 net sales from Freightliner, Ford and International, respectively.

The rating actions and improvement of Accuride's outlook to stable more favorably reflect that the refinancing transactions incorporated within the proposed amendment and restatement of Accuride's senior secured credit agreement will materially improve the company's prospective liquidity and reduce the likelihood of a near-term event of default, Moody's said.

This will transpire by virtue of a $40 million increase in the aggregate lender commitment, combined with deferral of near-term principal maturities and the readjustment of covenant requirements to reflect Accuride's revised capital structure and management's current financial projections indicating a slower than previously anticipated turnaround in industry conditions.

The proposed revisions to Accuride's covenant levels should enable Accuride to have the ability to draw down the full revolving credit facility if necessary and get through to the point of a cyclical recovery, Moody's said.

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