Moody's eyes RENK for downgrade

Moody's Investors Service said it placed on review for downgrade the B1 corporate family rating and the B1-PD probability of default rating of RENK GmbH. Moody's also placed on review for downgrade the B1 rating of its €320 million of guaranteed senior secured notes. Concurrently, the agency changed the outlook to under review from stable.

The review follows the announcement that RENK agreed to acquire the combat propulsion systems business and Magnet-Motors GmbH from L3Harris Technologies, Inc. for around $400 million cash, Moody’s said.

“The rating action reflects the uncertainties around the details of the transaction, its financing and the acquisition target itself. The acquisition of the Combat Propulsion Systems business and Magnet-Motors GmbH is sizable for RENK and may lead to an increase in leverage beyond levels commensurate with the B1. Moody's nevertheless recognizes that company will benefit from an increase in scale and diversification into the U.S. market, which may offset the weaker credit metrics,” the agency said in a press release.

Moody’s said the review will focus on the financing structure of the acquisition, the likely trajectory of credit metrics in the next 12-18 months, liquidity needs because of the enlarged business, and business risk implications.

“A downgrade, if any, would likely be limited to one notch,” the agency said.

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