Moody's cuts Federal-Mogul snr notes rtg to B3
Approximately $4.7 Billion of Debt Obligations Affected
(Press release provided by Moody's Investors Service)
NEW YORK, Jan 8 - Moody's Investors Service has revised its ratings of Federal-Mogul Corporation ("Federal-Mogul") to reflect the impact of the company's recent amended and restated US bank credit agreement, as well as the results of the National Economic Research Associates ("NERA") recalculation of Federal-Mogul's estimated asbestos liabilities.
Moody's downgraded Federal-Mogul's senior notes to B3 from B2, as a result of the effective subordination of the notes to the company's amended and new bank facilities.
On the same basis, the shelf registration for senior notes was downgraded to (P)B3 from (P)B2.
All other ratings were confirmed, including the B2 rating of Federal-Mogul's $1.75 billion of existing US bank facilities.
These ratings actions conclude our review of Federal-Mogul that was initiated on November 22, 2000.
The ratings outlook is negative.
The following specific rating actions were taken:
(i)Confirmation of the B2 rating of Federal-Mogul's $1.75
billion in existing senior secured US bank credit facilities,
consisting of a $1 billion revolving credit due 2004, a $400
million term loan A due 2004 and a $350 million term loan B
due 2005;
(ii)Downgrade to B3, from B2, of Federal-Mogul's aggregate
2.325 billion in senior unsecured notes with various
maturities;
(iii) Confirmation at Caa1 of $575 million 7% junior
subordinated debentures due 2027, together with confirmation
of the corresponding "caa" rating of Federal- Mogul Financing
Trust's $575 million of guaranteed trust preferred
securities;
(iv) Downgrade to (P)B3 from (P)B2 of Federal-Mogul's shelf
registration for senior debt;
(v)Confirmation at (P)Caa1/(P)"caa" of Federal-Mogul's shelf
registration for subordinated debt and preferred stock,
respectively;
(vi)Confirmation of Federal-Mogul's B2 senior implied rating;
and
(vii)Confirmation of Federal-Mogul's B3 senior unsecured
issuer rating.
The ratings and the negative outlook reflect Moody's ongoing concerns with the company's operating performance and with its ability to improve profitability and cash flow at a fast enough pace to offset various negative market pressures.
The most stressful market developments include the significant anticipated decline in OEM light vehicle production volumes in 2001, down to an analyst consensus of roughly 16 million units; continued negative pressures on both the North American and European automotive aftermarkets; and stepped-up OEM demands for additional price reductions, most notably by DaimlerChrysler.
While Federal Mogul's announced "six global initiatives" are logically aimed at better integrating acquisitions; resizing certain segments to current market conditions; controlling working capital; and generally imposing more effective controls company-wide, implementation will entail roughly two years of significant net cash outflows before the benefits of the restructuring become evident.
Moody's remains concerned that management's estimates of the timing and amount of the restructuring costs savings are somewhat aggressive. |
