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I AGREE
04 Jan 2011
Approximately $750 Million Of Debt Obligations Affected
New York, January 04, 2011 -- Moody's Investors Service affirmed the ratings of UCI International,
Inc. (UCI)--Corporate Family and Probability of Default
-- at B2. UCI is the ultimate parent of United Components,
Inc. This action follows UCI's disclosure of the financing
arrangements for the company's acquisition by an affiliate of the
Rank Group. In a related action, Moody's assigned a
Ba3 rating to UCI's new bank credit facilities, and a B3 rating
to UCI's new senior unsecured notes. The rating outlook is
stable.
Rank Group or its affiliate, subject to certain conditions,
will acquire all of the outstanding shares of capital stock and other
equity interests in UCI for a payment of $375 million to the company's
existing equity holders; and raise $250 million of new senior
unsecured notes, $450 million of new senior secured term
loans, and use cash on hand to refinance UCI's and its subsidiaries'
existing indebtedness. The transaction is subject to certain regulatory
approvals but is anticipated to close in Q1 2011.
The following ratings were assigned:
UCI International, Inc.
Ba3 (LGD2, 28%), to the new $75 million guaranteed
senior secured revolving credit due 2016;
Ba3 (LGD2, 28%), to the new $450 million guaranteed
senior secured term loan due 2017;
B3, (LGD5, 77%) to the new $250 million guaranteed
senior unsecured notes due 2019.
The following ratings were affirmed:
UCI International, Inc.
Corporate Family Rating, at B2;
Probability of Default Rating, at B2;
Unguaranteed senior unsecured notes; at Caa1 (LGD5, 86%)
-- the note ratings will be withdrawn upon their refinancing.
United Components, Inc.
$75 million guaranteed senior secured revolving credit due 2015,
Ba3 (LGD2, 24%);
$425 million guaranteed senior secured term loan due 2017,
Ba3 (LGD2, 24%);
The bank credit facility ratings will be withdrawn upon their refinancing.
RATINGS RATIONALE
The affirmation of B2 UCI's Corporate Family Rating incorporates the modest
debt reduction expected upon the consummation of the company's acquisition
by an affiliate of the Rank Group. Pro forma the transaction for
the LTM period ending 9/30/10, UCI's funded debt level is
expected to reduce by about 9%. Nevertheless, UCI's
pro forma Debt/EBITDA will remain high at approximately 5.7x.
As part of the transaction, UCI's Holdco PIK notes will be
repaid, eliminating the requirement in March 2012 to redeem for
cash a portion of the notes to the extent required to prevent the UCI
Holdco PIK notes from being treated as an applicable high yield discount
obligation. The company's financial flexibility to manage
through this requirement was incorporated in the upgrade of the Corporate
Family Rating in September 2010.
UCI's change in ownership is not expected to disrupt the company's
position as one of North America's leading suppliers of automotive aftermarket
parts. The ratings continue to benefit from the favorable demand
profile for aftermarket auto parts. The company's filtration products
(about 39% of 2009 revenues) are largely consumables that have
relatively short and predictable replacement cycles and are somewhat resistant
to economic downturns. The company's fuel delivery systems,
cooling systems, and vehicle electronics products (about 61%
of 2009 revenues) are non-discretionary products that are required
for proper vehicle performance, and have more stable demand patterns
which offer revenue visibility. Additionally, the domestic
vehicle population and average vehicle age are expected to continue to
increase over the intermediate-term.
UCI's liquidity profile is expected to remain adequate over the next twelve
months supported by the new $75 million revolving credit facility
and Moody's anticipation of positive free cash flow generation over
the near-term. UCI's existing liquidity includes a $75
million revolving credit facility that was unfunded on September 30,
2010 with approximately $23.7 million of availability due
to debt incurrence tests under the Holdco PIK Notes. Nonetheless,
availability is expected to improve under the new $75 million revolving
credit facility with the repayment of the existing Holdco PIK Notes from
newly issued debt and cash on hand. The company's cash balances
were about $171 million at September 30, 2010. However,
much of the cash is expected to be used toward refinancing existing indebtedness
as part of the company's acquisition by affiliates of the Rank Group.
UCI's large uncommitted receivable factoring program continues to
represent a liquidity risk if these programs are discontinued (without
the program, accounts receivable as of September 30, 2010
would have been $128.3 million higher). Yet,
these factoring arrangements support the commercial relationships between
UCI and certain of its longstanding customers. As such, these
programs are expected to remain largely in place over the intermediate
term. Alternate liquidity is anticipated to remain limited as essentially
all the company's domestic assets are expected to be used to secure the
new senior secured credit facilities.
The stable rating outlook reflects the company's improved profitability
over recent quarters due to the effects of cost reduction initiatives,
a stabilizing business environment, and adequate liquidity profile.
The last rating action for UCI was on September 29, 2010 when the
Corporate Family Rating was raised to B2.
The principal methodologies used in this rating were Global Automotive
Supplier Industry published in January 2009, and Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
UCI, headquartered in Evansville, Indiana, is one of
the larger and more diversified companies primarily servicing the vehicle
aftermarket. The company supplies a broad range of filtration products,
fuel delivery systems, cooling systems, and vehicle electronics
products. While approximately 88% of revenues are aftermarket
related, UCI also services customers within the marine, mining,
construction, agricultural, and industrial vehicle markets.
Annual revenues in 2009 were approximately $885 million.
UCI is currently a portfolio company of The Carlyle Group.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Timothy L. Harrod
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms UCI's ratings, Corporate Family Rating at B2
No Related Data.
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