S&P cuts ATU to B, bond to CCC+

Standard & Poor's said it lowered the corporate credit rating on Auto-Teile-Unger to B from B+, due to the company's weak operating performance and aggressive financial profile.

The outlook is stable.

S&P also lowered to CCC+ from B- the €150 million subordinated bond due 2014 issued by financial vehicle Auto-Teile-Unger Investment GmbH & Co. KG.

The downgrade follows ATU's weaker-than-expected performance in the third quarter, compounding the company's already weak performance over the past year due to the mild 2006/2007 winter, according to S&P.

Ratings reflect ATU's highly leveraged financial risk profile, after the second leveraged buyout of the company by Kohlberg Kravis Roberts & Co. in August 2004. The company also operates in Germany's highly competitive and low-growth automotive after-markets and lacks geographic diversification, the agency said.

These negative factors are mitigated by the issuer's business profile, which is stronger than its financial profile, due to its discount business model, branded product offering and high service content, S&P said.

The issuer's net debt-to-EBITDAR ratio was 6.9 times at Sept. 30.

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