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Rating Action:

Moody's Affirms UCI's ratings, Corporate Family Rating at B2

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Unguaranteed senior unsecured notes; at Caa1 (LGD5, 86%) -- the note ratings will be withdrawn upon their refinancing.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The bank credit facility ratings will be withdrawn upon their refinancing.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.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​
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