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25 May 2010
Approximately $1.8 Billion of Debt Obligations Affected
New York, May 25, 2010 -- Moody's Investors Service raised the ratings of Tenneco Inc. ("Tenneco")
-- Corporate Family and Probability of Default Ratings to
B2 from B3, and assigned a Ba2 rating the company's new $150
million senior secured term loan B and amended revolving credit facility.
In a related action Moody's raised the ratings on the company's
existing senior secured bank debt to Ba2 from Ba3, the second-lien
senior secured note to Ba3 from B1, the senior unsecured notes to
B2 from B3, and the senior subordinated notes to Caa1 from Caa2.
The rating outlook was revised to stable from positive at the higher rating
The upgrade of Tenneco's Corporate Family Rating to B2 reflects
Moody's view that the trajectory of the company's performance
and resulting credit metrics over the intermediate term will be favorably
supported by recent trends in North American automotive production levels
and our expectation that automobile registrations in Europe in 2010 will
not lag the global recovery as dramatically as previously anticipated.
Moody's expects this revised view of projected European registrations
to benefit automotive production which was previously expected to decline
3% for 2010. Approximately 44% of Tenneco's revenues
are in the company's European, South American, and Indian
markets. While the North American operations of the Detroit-3
account for about 21% of the company's revenues, this
risk is being partially mitigated by Ford's improving profitability
and market share, and improving profitability and stabilizing market
share for GM's retained product lines. These improved conditions
will allow the company to leverage its improved cost structure through
the remainder of 2010. Tenneco's aftermarket business (22%
of revenues) also should benefit from increasing consumer spending as
economic conditions stabilize. Higher commercial vehicle program
launches to new customers beginning in late 2010 and into 2011 related
to meeting emissions regulations also are expected to support the ratings.
Tenneco's EBIT/Interest (including Moody's Standard adjustments) approximated
1.3x and Debt/EBITDA approximated 4.0x for the LTM period
ending March 31, 2010.
The stable outlook reflects Moody's expectation that Tenneco's credit
metrics will support the assigned rating over the intermediate-term
and incorporate the seasonal nature of the company's operations.
Moody's anticipates that Tenneco will benefit from higher levels
of commercial vehicle program launches over the intermediate-term.
However, improvements in the company's end markets may be
weighed by the potential negative economic impact of government debt restructurings
of certain Eurocurrency countries on financing availability.
Tenneco has launched a transaction to amend and extend all or a significant
portion of its commitments under its $550 million revolving credit
facility and refinance its existing $128 million term loan A facility.
The amended revolver will mature in May 2014 compared to March 2012 for
the existing revolver. The new $150 million term loan B
facility will mature in May 2016. The amended revolving credit
facility will have an early termination date of 91 days prior to the maturity
of company's letter of credit/revolving loan facility, and
the second lien notes. The new term loan facility will have an
early termination date of 91 days prior to the maturity of company's
second lien notes and senior subordinated notes.
Tenneco is expected to have an adequate liquidity profile over the near-term.
As of March 31, 2010, the company maintained cash and cash
equivalents of $193 million. The current transaction will
eliminate the previous term loan A amortization requirement and Moody's
expects this change to result in a more modest cash burn over the next
twelve months. The company's extended revolving credit facility
is expected to retain the vast majority of the previous $550 million
commitment, while the $130 million commitment and 2014 maturity
of senior secured tranche B revolver/letter of credit facility will remain
unchanged. These facilities were unfunded as of March 31,
2010 with about $51 million of outstanding letters of credit.
Moody's, expects Tenneco's performance over the next twelve months
to provide ample cushion under the revised financial covenants of the
amended bank credit facilities, supporting access to the commitments
under the revolving credit and tranche B facilities. Alternative
sources of liquidity are limited as essentially all the company's assets
are pledged to secure the bank credit facilities.
The following ratings were raised:
Corporate Family rating, to B2 from B3;
Probability of Default rating, to B2 from B3;
Existing $550 million first lien senior secured revolving credit
facility, to Ba2 (LGD2, 11%) from Ba3 (LGD2,
(ratings to be withdrawn if fully refinanced);
$130 million first lien senior secured letter of credit / revolving
loan facility, to Ba2 (LGD2, 11%) from Ba3 (LGD2,10%),
(ratings to be withdrawn if fully refinanced);
10.25% guaranteed senior secured second-lien notes
due 2013, to Ba3 (LGD2, 29%) from B1 (LGD2, 28%);
8.125% guaranteed senior unsecured notes due 2015,
to B2 (LGD4, 51%) from B3 (LGD4, 50%);
8.625% guaranteed senior subordinated notes due November
2014, to Caa1 (LGD5, 84%) from Caa2 (LGD5, 84%)
The following rating was assigned:
Ba2 (LGD2, 11%) to the amended $550 million first
lien senior secured revolving credit facility, maturing in 2014;
Ba2 (LGD2, 11%) to the new $150 million first lien
senior secured term loan B, maturing in 2016
The last rating action for Tenneco was on March 29, 2010 when the
company's B3 Corporate Family Rating was affirmed and the rating outlook
changed to positive.
The principal methodology used in rating Tenneco was Moody's Global Auto
Supplier Industry Methodology, published in January 2009 and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Tenneco, headquartered in Lake Forest, Illinois, is
a leading manufacturer of automotive emissions control (approximately
63% of sales) and ride control (approximately 37% of sales)
products and systems for both the worldwide original equipment market
and aftermarket. Leading brands include Monroe®, Rancho®,
Clevite®, and Fric Rot ride control products and Walker®,
Fonos, and Gillet emission control products. Net sales in
2009 were approximately $4.6 billion.
Michael J. Mulvaney
Corporate Finance Group
Moody's Investors Service
Moody's Raises Tenneco's Corporate Family Rating to B2, outlook Stable
Timothy L. Harrod
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
No Related Data.
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