S&P rates Transportation Tech

Standard & Poor's said it placed its B corporate credit and other ratings on Transportation Technologies Industries Inc. on CreditWatch with positive implications. S&P also assigned its CCC+ subordinated debt rating to the company's proposed $100 million senior subordinated notes due 2010 and placed the rating on CreditWatch with positive implications.

The new subordinated notes are being exchanged for the company's existing $100 million senior subordinated notes (unrated).

At the same time, S&P affirmed its 2 recovery rating on the first-lien credit facility, indicating the likelihood of substantial (80% to 100%) recovery of principal in the event of default, and its 5 recovery rating on the second-lien term loan, indicating the likelihood of negligible (25% or less) recovery of principal in the event of a default.

S&P said the CreditWatch placement occurs as a result of the company's announced plans for an initial public offering and the use of proceeds to reduce debt. Pro forma for the IPO, total debt is expected to decrease by about $55 million.

As a result of the reduction in debt as well as a strong heavy duty truck build rate, total debt to EBITDA is expected to be about 4x, and EBITDA to interest coverage is expected to reach 2x in 2004, stronger than S&P's current expectations.

Upon consummation of the IPO and the reduction of debt, S&P said it will raise Transportation Technologies' corporate credit and senior secured bank loan ratings to B+ and the second-lien term loan and subordinated debt ratings to B-.

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