CHRYSLER $4.2 BILLION SENIOR DEBT LOWERED TO 'BB-' BY FITCH -- FITCH FINANCIAL WIRE --
CHRYSLER $4.2 BILLION SENIOR DEBT LOWERED TO 'BB-' BY FITCH
-- FITCH FINANCIAL WIRE --
NEW YORK, Jan. 21 /PRNewswire/ -- Chrysler Corp.'s $4.2 billion senior debt is lowered to 'BB-' from 'BB+.' The change also applies to and includes $1.1 billion of Auburn Hills Trust Guaranteed Exchangeable Certificates. All issues are removed from FitchAlert, where they were placed with negative implications on July 19, 1991. The credit trend remains negative.
The persistent U.S. recession and the continued low levels of domestic automotive sales have severely tested Chrysler's ability to finance its operations and to fund new product spending. Chrysler entered the recession with substantial cash, and to date has put in place $3 billion of cost reductions, largely offsetting the cost of buyer incentives. These, together with some $400 million of proceeds from a common share offering in September 1991, have enabled it to maintain cash above required operating levels. However, Chrysler has not yet completed certain asset sales to replenish its cash.
Although a domestic automotive recovery is likely to develop towards the latter half of this year, it is also likely to be far less robust than in previous cycles, given consumer caution and still-limited bank credit availability. This outlook, combined with Chrysler's need to carry on spending for its critical new products, will continue to strain the corporation's liquidity.
Fitch is concerned that if a recovery in auto markets and Chrysler's cash generation are delayed or weaker than expected, the company then faces rising cash requirements and a series of tradeoffs in order to maintain its viability. Even if Chrysler makes the minimum mandated pension contribution in 1992, required funding will rise substantially in 1993, and may mean that the company could need to adjust its product programs. The existing labor agreements will come up for renewal in September 1993, and major concessions cannot be expected. Chrysler could bridge its cash needs by borrowing under its $1.625 billion bank credit agreement, but is required to meet certain covenants and to pledge assets if drawings exceed $500 million. Finally, potential funding strains at Chrysler Financial Corp. may leave it in a weaker position to support the parent company's sales.
Chrysler Corp., headquartered in Highland Park, Mich., is the third largest domestic producer of cars and light trucks.
/CONTACT: Mary Anne Sudol of Fitch, 212-908-0562/
(C) CO: Chrysler Corp. ST: Michigan IN: AUT SU: RTG SM -- NY118 -- 2032 01/21/92 16:19 EST