S&P cuts Avio, rates PIK notes CCC+

Standard & Poor's said it lowered its long-term corporate credit rating on Avio Holding SpA to B from B+ following Avio's announcement that its ultimate parent company, Aero Invest 1 S.A., is considering issuing €350 million of subordinated floating-rate pay-in-kind notes due 2015. The outlook is stable.

At the same time, S&P lowered to CCC+ from B- its subordinated debt rating on Avio's €200 million notes due 2013, issued by wholly owned subsidiary ASPropulsion Capital BV.

In addition, S&P assigned its B long-term corporate credit rating to Aero Invest 1 SA and its CCC+ long-term debt rating to Aero Invest 1's above-mentioned proposed €350 million subordinated floating-rate PIK notes.

The money raised through the PIK notes will be used to repurchase a €162 million vendor loan from Fiat and to make shareholder distributions.

Although S&P said it does not expect the proposed PIK notes to affect Avio's cash flow generation, they still represent additional debt that might need to be refinanced in the future and therefore add to Avio's overall debt burden.

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