Fitch: American Axle on watch

Fitch Ratings said it placed the ratings of American Axle & Manufacturing Holdings, Inc. and subsidiary American Axle & Manufacturing, Inc. on Rating Watch negative.

This includes the BB long-term issuer default ratings, as well as the company's secured revolving credit facility and senior unsecured notes ratings.

The negative watch placement follows news that American Axle will acquire Metaldyne Performance Group Inc. in a cash and stock transaction, Fitch said.

The ratings on watch include American Axle & Manufacturing Holdings’s issuer default rating of BB, along with American Axle & Manufacturing’s issuer default rating of BB, secured revolving credit facility rating of BB+ with recovery rating of RR1 and senior unsecured notes rating of BB with recovery rating of RR4.

The company plans to fund the transaction using a combination of cash, incremental borrowing and stock, Fitch said.

The acquisition is expected to significantly enhance the diversity of American Axle’s book of business, which has been a key part of its strategy in the post-recession period, the agency said.

Although the transaction will grow and diversify the company’s business, there also are important risks associated with merging the operations of these sizable companies, Fitch said.

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