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I AGREE
13 Jul 2000
MOODY'S RATES ARVINMERITOR, INC.'S BANK CREDIT FACILITIES; UPGRADES DEBT RATING OF ARVIN INDUSTRIES, INC. (SR. TO Baa2)
Approximately $2.7 Billion of Debt Securities Affected.
New York, July 13, 2000 -- Moody's Investors Service assigned a Baa2 senior unsecured long-term
debt rating to the new bank revolving credit facilities of ArvinMeritor,
Inc (ARM). At the same time, the rating agency upgraded the
debt ratings of Arvin Industries, Inc. (Arvin). The
rating actions complete the review of Arvin initiated in April,
2000 following the announcement of a merger agreement between Meritor
Automotive, Inc. (Meritor) and Arvin, creating ARM.
The merger became effective July 7, 2000, and ARM has become
the legal obligor for the extant debt obligations of Meritor and Arvin.
The rating actions reflect the potential benefits that should arise from
combining the two companies, including operational, product
development and management synergies, product line extension,
increased market presence and improved long-term financial strength.
Moody's actions also incorporate near-term integration risks,
the relatively high leverage of the combined entity, and the cash
flow impact of a modest planned cash payment to Arvin shareholders.
The ARM rating outlook is stable.
Ratings upgraded are:
Arvin Industries, Inc.: senior unsecured notes to Baa2
from Baa3; subordinated notes to Baa3 from Ba2.
Arvin Capital I: backed preferred stock to "baa3" from "ba2".
Arvin International (UK) plc: backed senior unsecured domestic currency
rating to Baa2 from Baa3.
Arvin Overseas Finance B.V.: backed senior unsecured
medium term note program to Baa2 from Baa3.
Ratings assigned are:
ArvinMeritor, Inc.: $1.5 billion senior
unsecured bank revolving credit facilities rated Baa2.
Ratings withdrawn are:
Arvin Industries, Inc.: Baa3 rating for the $100
million bank revolving credit facility due 8/27/2002; (P)Baa3 rating
for senior debt securities, (P)Ba2 for subordinated debt securities,
and (P)"ba2" for preferred stock to be issued pursuant to the 415 shelf
registration.
Meritor Automotive, Inc.: Baa2 rating for the $1.0
billion bank revolving credit facility due 8/21/2002.
The ARM $1.5 billion senior unsecured bank revolving credit
facilities consist of two tranches -- a $750 million,
364-day Revolving Credit Facility with a two year term option,
maturing on 6/27/2001; and a $750 million five-year
Revolving Credit Facility maturing on 6/27/2005. Major covenants
for these facilities include a debt/EBITDA coverage ratio. These
credit facilities replace the bank credit facilities of both Arvin and
Meritor, which were terminated as of the merger closing date,
and the ratings were withdrawn. In addition, the remaining
availability under Arvin's 415 shelf registration was also terminated,
and the ratings associated with the shelf have been withdrawn.
On April 6, 2000, Meritor and Arvin announced a definitive
merger agreement. Under the terms of the agreement, holders
of Arvin Industries stock received one share of the merged entity,
ArvinMeritor, Inc., plus $2.00 cash for
each share of Arvin stock. Holders of Meritor Automotive received
0.75 shares of ArvinMeritor for each share owned. Through
the filing of supplemental indentures on July 7, 2000, the
effective date of the merger, all Arvin and Meritor extant debt
has been legally assumed by ARM and will rank pari passu to other senior
debt obligations of ARM.
From an operations and market perspective, Moody's noted that the
combination creates a strong global competitor in the increasingly demanding
automotive supply industry, where a consolidating customer base
and constant pricing pressure virtually dictate that suppliers develop
strong global capabilities. In addition, ARM expects to improve
operating efficiency, reduce unit overhead, and extend product
lines and product development opportunities. From a financial perspective,
the combination creates a larger and potentially more stable competitor
in the automotive industry, with lower costs and greater resistance
to industry cyclicality. Attainment of these projected benefits
would strengthen ARM's position in the Baa2 category.
As in any business combination, primary risks include the ability
to integrate and manage operations efficiently as well as the need for
different corporate cultures to blend compatibly. Pro forma debt
protection measures for the combined entity are adequate for the Baa2
rating, but will benefit from attainment of projected margin improvement.
ArvinMeritor, Inc., based in Troy, Michigan,
is a global supplier of integrated systems, modules and components
serving light vehicle and commercial truck manufacturers, and related
aftermarkets.
New York
Michael J. Mulvaney
Managing Director
Corporate Finance
Moody's Investors Service
New York
George A. Meyers
Vice President - Sr Credit Offic
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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