Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S DOWNGRADES RATINGS OF LEAR CORPORATION; SENIOR UNSECURED TO Ba2; ASSIGNS SGL-2 SPECULATIVE GRADE LIQUIDITY RATING; OUTLOOK STABLE

29 Jul 2005
MOODY'S DOWNGRADES RATINGS OF LEAR CORPORATION; SENIOR UNSECURED TO Ba2; ASSIGNS SGL-2 SPECULATIVE GRADE LIQUIDITY RATING; OUTLOOK STABLE

Approximately $1.8 billion of rated debt affected

New York, July 29, 2005 -- Moody's Investors Service has downgraded the senior unsecured debt rating of Lear Corporation ("Lear") to Ba2 from Baa3. At the same time the rating agency assigned a Corporate Family rating (previously called senior implied) of Ba2, and a Speculative Grade Liquidity rating of SGL-2, representing good liquidity over the next twelve months. The actions conclude a review initiated on June 27, 2005 and incorporate; 1) reduced expectations for the company's near term profitability and cash flow, 2) the increase in indebtedness associated with funding requirements arising from negative operating cash flow, higher capital expenditures and disbursements under restructuring programs, and 3) the resultant lower debt protection ratios over the intermediate term. The actions further reflect the challenging operating environment and structural issues facing the North American automotive supplier industry. Among the structural concerns are lower production volumes and adverse vehicle mix trends from the Big 3 North American OEMs who still account for about half of Lear's revenue. In addition, Lear faces the need to increase its capital expenditures that will support the launch of new business awards, and fund restructuring programs that will improve its cost position, accelerate a transition to lower cost countries, and rationalize its capacity. Lear continues with an experienced operating team, profitable operations outside of North America, and has sufficient liquidity to finance its cash needs over the next 18 months. In addition, Lear has received an underwritten commitment for a $300 million term loan to provide further liquidity cushion. This facility is currently being syndicated and is expected to close in August. In addition it is expected to obtain greater flexibility under its $1.7 billion bank revolving credit through covenant amendments. A stable outlook flows from expectations that upon completion of its restructuring initiatives and higher capital expenditures in support of new business, Lear ought to emerge in 2006 with a more diverse geographic and customer base that will support stronger margins and renewed free cash flow generation.

Ratings Lowered are:

Senior Unsecured, Ba2 from Baa3

Shelf registration for senior unsecured, subordinated, and preferred to (P)Ba2 from (P)Baa3, (P)Ba3 from (P)Ba1, and (P)B1 from (P)Ba2 respectively

Ratings assigned

Corporate Family Ba2

Speculative Grade Liquidity Rating, SGL-2

The rating for the company's previous bank credit facility, which was replaced with a new facility in March 2005, has been withdrawn. Moody's has not been requested to rate the new bank credit facility.

Lear has recently revised its guidance on free cash flow for fiscal 2005 to approximately negative $375 million (inclusive of estimated restructuring disbursements but prior to dividends), and lowered its estimated net income for the year to $100-$125 million (before unusual items) from a previous mid-point of $200 million. Principal factors affecting the downward revision include: higher commodity costs for resin, steel, and chemicals; lower production volumes in its high content top 15 programs many of which face model change-overs in the second half of 2005; lower market share of the Big 3 OEMs in North America; a distressed supply base; stepped-up capital expenditures in support of strong launch activity; and the need for restructuring actions involving up-front cash expenditures. The negative cash flow is expected to be funded by higher levels of external financing, primarily its existing five year credit facility. In addition, Lear has received an underwritten commitment for a $300 million term loan to provide further liquidity cushion. As a result, at year end 2005 Lear's Debt/EBITDA ratio (using Moody's standard adjustments) is expected to exceed three times with EBIT/Interest cover under 2.0 times. While these ratios and Lear's free cash flow would be expected to improve in 2006, debt protection measures will no longer be representative of investment grade stature. Lear's pension plan was under-funded at year-end 2004 by $200 million with projected contributions in 2005 of $53-$58 million. Moody's believes that these payment levels are manageable and roughly level with annual periodic benefit cost. Although Lear's book of new business is expected to improve its customer diversification on a global basis, the company will continue with significant exposure to GM and Ford (collectively 55% of 2004 global revenues) in its critical North American market (44% of 2004 revenues were from the U.S. and Canada) in what remains a cyclical industry. Consequently, a corporate family rating of Ba2 has been assigned.

While Lear is expected to maintain adequate cushion relative to the financial covenants in its bank credit facility, the company is currently seeking amendments that would provide greater cushion should the business environment weaken. Lear is seeking to amend its $1.7 billion revolving credit which has an expiration date in March 2010. Under the terms of the proposed amendment the company's maximum permissible defined net debt will be set at 3.75 times defined Consolidated Operating Profit (approximately equal to EBITDA) for the balance of 2005, stepping down through the first half of 2006. In addition clarification will be added that certain restructuring charges and legal settlements will be excluded from the definition of Consolidated Operating Profit. The company will reinstate a pledge of shares of certain subsidiaries that had been released earlier this year. The subsidiary shares pledged will primarily consist of Lear's wholly owned domestic subsidiaries, and 65% of the stock of certain first tier non-domestic subsidiaries. The pledge will not be shared with the unsecured notes. However, both the banks and the notes have up-stream guarantees. The rating agency believes this structure does not afford a sufficient difference in the degrees of protection to warrant a rating distinction at this time, as the value of pledged shares would be net of the liabilities inclusive of the guarantees at the respective subsidiaries. As a result, the unsecured notes have been assigned a Ba2 rating, level with the corporate family rating. The amended bank facility and new term loan are not rated.

A speculative grade liquidity rating of SGL-2 has been assigned representing good liquidity over the next 12 months. Lear's liquidity profile consists of modest amounts of balance sheet cash, prospectively weak cash flows for 2005 and early 2006, substantial amounts of committed liquidity under its term revolver, and adequate headroom under its financial covenants. Following the repayment of $600 million of maturing notes in June, Lear is not expected to maintain large amounts of surplus cash as short term debt reduction would represent a higher return. Funding requirements arising from negative free cash flow will substantially be covered under Lear's revolving credit facility. Lear does not face any significant amounts of maturing debt until early 2007 when the new bank term loan would mature and the first put date on its convertible issue arrives. However, its $150 million accounts receivable securitization facility has a renewal date in November 2005. Lear maintains a $1.7 billion revolver whose current maturity is in March 2010. At June 30, 2005 there were no outstandings under the facility, but roughly $58 million of letters of credit had been issued against the commitment. While Lear is expected to maintain adequate cushion relative to the financial covenants in its bank credit facility, the company is currently seeking amendments that would provide greater cushion should the business environment weaken. Lear has a portfolio of business units, investments in affiliates and un-pledged tangible assets which could facilitate sources of alternative liquidity.

Factors that could lead to higher ratings include: improved penetration of non-Big-3 automakers that would provide greater business stability; achieving and sustaining free cash flow to debt greater than 10%; EBIT/Interest coverage returning to 4 times or higher; and debt/EBITDA reverting to under 2.5 times.

Developments that could result in lower ratings include: evidence that anticipated improvements in profitability and renewed free cash flow generation would be delayed; debt/EBITDA deteriorating beyond 3.5 times, EBIT/Interest coverage consistently below 2 times; or pursuit of shareholder return actions in advance of stabilization of the business.

Lear Corporation, headquartered in Southfield, MI, is an integrator of automotive interiors, including seat systems, interior trim and electrical systems. The company had revenues of $17 billion in 2004 and has more than 110,000 employees in 34 countries.

New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Edwin Wiest
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com