S&P rates Penske Automotive notes B-

Standard & Poor's said it assigned a B- rating and 6 recovery rating to Penske Automotive Group Inc.'s proposed offering of $200 million senior subordinated notes due 2020. The 6 recovery rating reflects an expectation that lenders would receive 0% to 10% recovery in a default.

The company said it intends to use the net proceeds to purchase its 3 ½% convertible notes.

The agency said it believes the transactions are positive, even though cash interest will rise, because they will reduce near-term debt-refinancing risk, thus improving Penske's near-term financial flexibility.

The ratings reflect a view that the company will be able to maintain current credit measures while preserving its fair financial policy and capability to generate free cash flow into 2011, the agency said.

During the recession and sharp downturn in light-vehicle sales, the company controlled its variable costs to mitigate margin erosion and offset difficult auto sales with its sizable dealership network and diverse revenue streams, S&P said.

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