S&P: ATU outlook negative.

Standard & Poor's said it affirmed its B- long-term corporate credit rating on ATU Auto-Teile-Unger and the CCC debt rating on ATU Auto-Teile-Unger Investment GmbH & Co. KG's €150 million subordinated bonds due 2014.

The ratings were removed from CreditWatch, where they were placed on Jan. 11 with negative implications due to the agency's concern that, as of financial year-end 2007, the company could have breached its consolidated leverage ratio covenants under its bank credit agreement. The outlook is now negative.

The affirmation follows ATU's announcement that it has been granted a covenant waiver, as well as an amendment to its senior credit facility. Both are subject to the injection of €140 million in equity by company shareholders Kohlberg Kravis Roberts & Co. and Doughty Hanson.

ATU's lenders have agreed to suspend financial covenants relating to its senior debt for the first three quarters of 2008 and to renegotiate new covenants. S&P said this should give the company enough headroom to comply with lenders' requirements, assuming its weak 2007 operating performance doesn't deteriorate further.

The agency said it expects the company's liquidity to improve significantly after the equity injection but said the outlook is negative because it also expects market conditions to remain challenging.

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