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Moody's downgrades TRW notes to B1, rates new notes Ba3
Moody's Investors Service said it assigned Ba3 (LGD5, 76%) ratings to TRW Automotive, Inc.'s new $670 million senior unsecured notes due 2014, €250 million senior unsecured notes due 2014 and $500 million senior unsecured notes due 2017.
The Ba2 corporate family and probability-of-default ratings, SGL-2 speculative grade liquidity rating and Ba1 (LGD2) senior secured credit facilities were affirmed, but the loss-given-default rate assigned to the credit facilities was changed to 26% from 24%.
The agency also lowered the company's 9 3/8% senior notes due 2013 to B1 (LGD6, 97%) from Ba3 (LGD5, 70%), its 10 1/8% senior notes due 2013 to B1 (LGD6, 97%) from Ba3 (LGD5, 70%) and its 11¾% senior subordinated notes due 2013 and 11% senior subordinated notes due 2013 to B1 (LGD6, 97%) from B1 (LGD6, 94%).
The outlook remains stable.
The proceeds from the new notes are expected to finance the repurchase of the existing notes. Moody's noted that the lower ratings apply to any stub portion of the notes, which will likely be stripped of protective covenants, that remains outstanding after a tender offer.
The agency said the ratings reflect the company's well-diversified revenue base, long-standing supply arrangements with European and Asian auto makers and continuous investment in new technologies, which should support future revenues even as automotive demand softens.
However, TRW has experienced the effects of ongoing pricing pressures from original equipment manufacturers and commodity price increases, Moody's said, adding that the company's total debt-to-EBITDA ratio was 2.9x for the last 12 months ended Dec. 31.
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