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Rating Action:

Moody's Assigns B1 Corporate Family Ratings to Metaldyne, LLC

30 Sep 2010

Approximately $225 million of rated debt affected

New York, September 30, 2010 -- Moody's Investors Service assigned first time ratings to Metaldyne, LLC ("Metaldyne") -- Corporate Family and Probability of Default Ratings, B1; and $225 million senior secured term loan facility, B1. The rating outlook is stable. Proceeds from the $225 million term loan will be used to repay existing debt, fund a distribution to the company's shareholders (including the company's lead sponsors, The Carlyle Group and Solus Alternative Asset Management LP), and pay related fees and expenses.

The B1 Corporate Family Rating reflects Metaldyne's modest leverage, despite the company's shareholder distribution, exposure to the cyclical automotive industry, and high customer concentrations to the Detroit-3. Approximately 36% of the company's revenues are from the Detroit-3, with Ford representing the largest customer. The rating also reflects Metaldyne's operating performance since being purchased out of Chapter 11 in October 2009. This performance has benefited from recovering automotive production levels in North American (about 51% of revenues) and Europe (36%), and from restructuring activities enacted in late 2009. These restructuring actions included the sale of certain of the company's non-core domestic and international facilities. Industry conditions are expected to improve over the trough in 2009 with U.S. retail sales improving to 11.5 million units during 2010. While first half 2010 car registrations in Europe have improved over prior period levels, the second half of 2010 is expected to reflect seasonal softness and the impact of expired government scrappage programs. European registrations in 2011 also are expected to be challenged by a potential negative impact of European government debt restructuring programs on automobile demand.

The stable outlook incorporates Moody's expectation that Metaldyne's strong credit metrics will help to mitigate the higher business risk associated with the company's relatively small revenue base and high customer concentrations with the Detroit-3.

Metaldyne is expected to have an adequate liquidity profile over the near-term supported by cash balances and free cash flow generation. The company is expected to have about $100 million of cash on hand following the close of the transaction. Moody's anticipates that the company's free cash flow generation over the near-term will be positive after working capital and capital expenditure needs. While the new term loan will have modest amortization requirements, the company's liquidity profile has to accommodate the potential risk that factoring programs might not be renewed on a timely basis. Metaldyne's $40 million asset based revolving credit is modest in size and is expected to remain largely unused over the near-term and support a modest amounts of letters of credit. The asset based revolving credit facility will have a springing fixed charge coverage covenant of 1x, based on an availability trigger under the facilities. Covenants under the secured term loan will include a minimum interest coverage test and a maximum leverage test. Alternate sources of raising liquidity are limited as essentially all the company's domestic assets will secure the ABL and term loan facilities.

The rating and/or outlook could improve if Metaldyne were to demonstrate continued improvement in revenues, and operating performance resulting in debt/EBITDA reducing to 2.5x on sustained basis and EBIT/interest coverage approaching 3.0x. Further customer and industry diversification could also result in positive ratings momentum.

The outlook or rating could be lowered if North American automotive production levels do not recover as anticipated, resulting in substantially weaker profitability or a deterioration in liquidity. If operations were to weaken such that debt/EBITDA were to approach 4.5 times or free cash flow generation was not realized, the company's rating and/or outlook could be lowered.

The following ratings were assigned:

Corporate Family Rating, B1;

Probability of Default, B1;

B1 (LGD3, 44%), for the $225 million senior secured term loan

The principal methodologies used in rating Metaldyne, LLC 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. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Metaldyne, LLC is a leading global manufacturer of highly engineered metal-based components for light vehicle engine, transmission and driveline applications for the global automotive light vehicle market. The company is wholly-owned subsidiary of MD Investors Corporation which itself is owned by a coalition of investors led by The Carlyle Group and Solus Alternative Asset Management LP.

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's information.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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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.

Moody's Assigns B1 Corporate Family Ratings to Metaldyne, LLC
No Related Data.
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