Fitch raises Tenneco outlook

Fitch Ratings raised its outlook on Tenneco Automotive Inc. to stable from negative and confirmed its ratings including its senior secured bank debt at B+, senior secured notes at B and subordinated debt at B-.

Fitch said the action reflects Tenneco's stable consolidated operating performance with progress in cost reduction efforts, greater exposure to light truck platforms in the North American original equipment operations, stabilization of European original equipment operations and good growth in the rest of world operations allowing for overall operating profit stability, overcoming general vehicle build rate weakness and continuing after market softness.

Also, stable consolidated operating profitability coupled with on going working capital reduction efforts have led to some debt reduction, Fitch noted.

Looking forward, Tenneco's aggressive cost cutting posture and a generally stable original equipment volume environment going into 2004, plus continued working capital reduction should allow for the debt reduction trend to continue.

The credit improvement and the resulting outlook upgrade are balanced, however, by the intensely competitive pricing environment from both original and after market customers which may limit and possibly compress margin performance, ultimate production volume uncertainty, and continued slide in after market sales. And, due to the highly levered capital structure, Tenneco stands vulnerable to these operating risks should it not be able to execute on its operating goals, Fitch added.

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