New York, April 18, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 11 April 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Automotive Suppliers published in May 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Automotive Suppliers
Scale: Scale is considered because it is an indicator of a company's market strength and operating flexibility, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Scale has a bearing on other considerations, such as geographic diversity and R&D capabilities. Scale is measured using total reported revenue.
Business Profile: The business profile of an automotive supplier is considered because it greatly influences its ability to generate sustainable earnings and operating cash flow. A core aspect of an auto supplier's business profile is its technological capability. Companies at the forefront of technological and product innovation and that have a record of successful R&D investment benefit from barriers to entry and are typically less vulnerable to competitive threats, including product substitution, than companies that are more focused on commodity-type products. Content per vehicle, which is the value of all products supplied for one specific vehicle, is also an indicator of the value of an auto supplier's products to automakers.
Profitability and Efficiency: Profitability is an indicator of an automotive supplier's ability to generate stable cash flow and maintain a competitive position. In addition, profit margins provide another indication of the value of an auto supplier's products to vehicle manufacturers. The ability to generate strong profit margins after R&D investment enables an auto supplier to make further investments in technology and broaden its leadership within the industry. The EBITA margin and expected Free Cash Flow Stability are indicators of profitability and efficiency.
Leverage and Coverage: Leverage and coverage measures provide important indications of financial flexibility and how much financial risk an automotive supplier is willing to undertake. Financial flexibility is critical to an auto supplier's ability to invest in R&D as well as to make strategic acquisitions both to acquire critical technology and expand vehicle programs to meet new platform launches. Among others, ratios such as Debt/ EBITDA, EBITA-/ Interest Expense, and Retained Cash Flow/ Net Debt are indicators of leverage and coverage.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance. Many auto suppliers have historically used acquisitions or have invested heavily in R&D to spur revenue growth, expand business lines, consolidate market positions, advance cost synergies, or seek access to new technology. The financing of such investments is often an important indicator for a company's financial policy.
Other Factors: Other factors may include, but are not limited to, financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• Adient Global Holdings Ltd
• Allison Transmission, Inc.
• American Axle & Manufacturing, Inc.
• Autokiniton US Holdings, Inc.
• BorgWarner Inc.
• Clarios Global LP
• Commercial Vehicle Group, Inc.
• Dana Incorporated
• Dayco Products, LLC
• First Brands Group, LLC
• Goodyear Tire & Rubber Company (The)
• Holley Inc.
• IXS Holdings, Inc.
• J.B. Poindexter & Co., Inc.
• Lear Corporation
• Magna International Inc.
• Meritor, Inc.
• Park-Ohio Industries Incorporated
• RC Buyer, Inc.
• Superior Industries International, Inc.
• Tenneco Inc.
• TI Group Automotive Systems L.L.C.
• Visteon Corporation
• Wheel Pros, Inc.
The principal methodology used for these rated entities was Distribution & Supply Chain Services Industry published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Distribution & Supply Chain Services Industry
Scale: Larger scale can be an indicator of a company's ability to influence business trends and pricing within its service segments and to support a stable or growing market position. Scale also can be an indicator of greater resilience to changes in demand, geographic diversity, cost absorption, R&D capabilities and greater bargaining strength with customers, labor, and vendors. Scale is measured using total reported revenue and adjusted EBITA.
Business Profile: We consider the underlying demand characteristics of a company's service offerings and its relative breadth, strength, and durability of demand.
Profitability and Efficiency: Profitable returns matter because they are necessary to maintain a business' competitive position, including sufficient reinvestment in operations, marketing, research, facilities, and human capital. Sustained high profitability is generally a strong indicator of substantial competitive advantages, particularly if combined with evidence of a stable or rising market share. For issuers in the supply chain sector, working capital management matters, especially when considering the typically low operating margins that necessitate maintaining strong liquidity and low cash conversion cycles. The Operating margin and Return on Invested Capital are indicators of profitability and efficiency.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability, including their ability to adapt to changes in economic and business environment in the segments in which they operate. Among others, ratios such as Debt/ EBITDA, EBITA/ Interest Expense, and Retained Cash Flow/ Debt are indicators of leverage and coverage.
Financial Policy: We consider management and board tolerance for financial risk as it directly affects debt levels, credit quality and the risk of adverse changes in financing and capital structure. We assess the issuer's desired capital structure or targeted credit profile, history of prior actions and adherence to its commitments. Attention is paid to management's operating performance and use of cash flow through different phases of economic and industry cycles. Also of interest is the way in which management responds to key events, such as changes in the credit markets and liquidity environment, legal actions, competitive challenges, and regulatory pressures. Management's appetite for M&A activity is assessed, with a focus on the type of transactions and funding decisions.
Other Factors: Other factors may include, but are not limited to, our assessment of the quality of management, corporate governance, financial controls, liquidity management, event risk, and seasonality.
• American Tire Distributors, Inc.
• Dealer Tire Financial, LLC
• LKQ Corporation
• PAI Holdco, Inc.
• TruckPro Holding Corporation
The principal methodology used for these rated entities was Surface Transportation and Logistics published in December 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Surface Transportation and Logistics
Scale: Scale is considered because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. A large revenue base can lead to economies of scale, for example in terms of equipment costs, as well as a stronger pricing position with customers. Large-scale companies within the industry generally have more flexibility to manage their businesses under different demand and cost scenarios, an important consideration for the surface transportation and logistics industry, which is exposed to economic cycles. Larger companies also generally have greater access to the capital markets, critical for asset-intensive companies such as railroad and trucking companies, which need frequent access to capital markets in order to make sizable investments in their businesses. Scale is measured using total reported revenue.
Business Profile: The business profile of a surface transportation and logistics company greatly influences its ability to generate sustainable earnings and operating cash flows. We break out the scorecard definitions by railroad companies and by trucking and logistics companies based on the different characteristics of the two subsectors. Core aspects of a railroad operator's business profile are its control of the railroad system it operates and its geographic presence. Core aspects of a trucking and logistics company's business profile include its market position; barriers to enter the market in which it operates; diversification by geography and service offering; the quality and diversity of its customer base; and its degree of control over its assets.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position. Key metrics for profitability and efficiency include Operating Margin and EBITA/ Average Assets.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a surface transportation and logistics company's financial flexibility, which is critical to its ability to adapt to changes in market conditions in this highly cyclical sector. Companies need financial resources to invest in infrastructure, equipment, and facilities as well as to make strategic investments to acquire new businesses, diversify product lines or expand into developing geographic regions. Leverage and coverage metrics include Debt/ EBITDA, Funds from Operations/ Debt and EBIT/ Interest Expense.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• Odyssey Logistics & Technology Corporation
• PODS LLC
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on www.moodys.com, for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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