Fitch Ratings Places Lear's 'B' IDR On Rating Watch Negative.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has placed Lear Corporation (Lear) on Rating Watch Negative as follows: --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) 'B'; --Senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. 'B/RR4'. Fitch's rating action follows Lear's announcement that after discussions with Carl Icahn, his affiliate, American Real Estate Partners American Real Estate Partners, L.P. (AREP) (NYSE: ACP) is a diversified real estate holding company based in White Plains, New York. History The Sands in Atlantic City and some adjacent property, was sold in November of 2006 for $274. LP, has made an offer to acquire the company. Lear's 'BB/RR1' rated senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and senior secured term loan are both unaffected as they contain 'change-of-control' clauses. If an acquisition is completed, Lear would most likely need to renegotiate an entirely new bank agreement. Lear's revolving credit agreement Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. gives the company healthy liquidity, crucial during the currently volatile environment being experienced by the industry. However, Fitch is concerned that as part of an acquisition, the amount of Lear's total debt could potentially increase, resulting in reduced liquidity and greater default risk. In addition, if incremental debt were secured, the position of the senior unsecured debtholders would be impaired. The Rating Watch Negative will be resolved following Fitch's assessment of any resulting changes in Lear's capital structure and liquidity. Lear completed financing arrangements during 2006 which ensures that the company will have good liquidity, relaxed covenants and no major maturities while restructuring its operations in the near term. However, Lear faces very difficult conditions in the U.S. market due to declining domestic manufacturers' production levels (particularly in the major platforms Lear serves), high commodity costs and restructuring costs. Lear is a major seating and interior products supplier to domestic passenger truck programs that have fallen from consumer favor. New business wins and reduced capital expenditures should help support operating results during the restructuring process in the near term. However, new business backlog after 2007 drops off substantially. The formation of a joint-venture to which Lear will contribute its interiors operations is viewed as a positive due to that unit's operating losses and high capital expenditure requirements, despite the financial commitments associated with the agreement. Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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