Moody's downgrades TI Automotive

Moody's Investors Service said it downgraded TI Automotive Ltd.'s corporate family rating to Caa1 from B3 and its senior secured bank facility to B3 from B2.

This concludes the review for downgrade begun on Oct. 6, and the outlook is negative.

The agency said the downgrade reflects the limited prospects for a turnaround of negative free cash flows over the short to medium term in light of the ongoing challenging operating environment in the North American auto industry, which could offset the benefits from the company's implemented and targeted cost structure improvements, and TI Auto's highly leveraged capital structure.

TI Automotive is in the process of refinancing its debt structure following the recent disposal of its industrial division. The new debt structure will potentially include £367.5 million of first-lien debt, £167.5 million of second-lien debt and a £75 million revolving facility, and the refinancing may increase TI Automotive's interest cost burden.

Moody's said the proceeds from the industrial division disposal are beneficial for the company's liquidity position over the short term, but the disposal increased the company's exposure to the auto industry, the company will need to cover the loss of the industrial segment's cash flow contributions and, given the limited prospects of short-term improvements in operating performance, the company remains reliant on further asset disposals to reduce financial leverage and cover expected negative free cash flows in the next 12 to 18 months.

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