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Rating Action:

Moody's Raises Tenneco's Corporate Family Rating to B2, outlook Stable

Global Credit Research - 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 level.

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, 10%),

(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 website.

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.

New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Timothy L. Harrod
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Raises Tenneco's Corporate Family Rating to B2, outlook Stable
No Related Data.
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