Fitch upgrades Tenneco

Fitch Ratings said it upgraded Tenneco Inc.'s issuer default rating to BB- from B+ and subordinated notes to B from B-. The BB+ senior secured bank credit facility and BB senior secured second-lien notes were affirmed. The outlook remains positive.

Fitch said the upgrade is based on Tenneco's track record of strong operating discipline and working capital management, consistent cash flow generation, capital structure improvement and continued expansion and customer diversification across its business segments. Fitch expects Tenneco to have positive free cash flow in 2006, with further improvement in its leverage position.

Throughout 2005, Tenneco faced the same headwinds as other suppliers, including higher steel prices, lower and unsteady customer production volumes, exposure to the slowdown in SUV demand and tightening trade credit.

However, Fitch said Tenneco was able to offset these challenges with increased revenue from new business launched, gains in manufacturing efficiency, close attention to working capital requirements and a geographically diverse customer base compared with other North American suppliers. The company also reduced its total adjusted debt to EBITDA ratio to 3.5x at the end of 2005 from 4.2x in 2004.

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