Moody's may downgrade TI Automotive

Moody's Investors Service said it placed the B1 corporate family rating and B1 senior secured bank credit facility of TI Automotive Ltd. on review for possible downgrade following the accelerated market share erosion of TI Automotive's key customers - Ford Motor Co., General Motors Corp. and DaimlerChrysler AG - in the North American market over recent months, resulting in significantly lower production volumes and the uncertain implications on TI Automotive's credit profile.

The agency noted that the weakening market position of these customers, which in North America accounted for 27% of TI Automotive's 2005 global revenues, has resulted from the structural shift in consumer preference away from trucks and SUVs and towards more fuel-efficient vehicles and from the increasingly competitive product offerings from Asian manufacturers, which are still somewhat under-represented in TI Automotive's customer structure.

Moody's said TI Automotive's business model remains robust, as evidenced by its strong market position as an automotive supplier of fluid-carrying systems, fuel storage and delivery systems, its presence on a wide array of platforms and its diversification by region.

These qualitative strengths are offset by weak credit metrics, namely a high financial leverage and limited prospects for positive free cash flows, given the need for substantial ongoing capex and technology investment requirements to pre-finance orders, the agency said.

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