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Rating Action:

Moody's assigns B2 rating to Exide's new senior secured notes, outlook changed to positive

06 Aug 2010

$675 million of rated obligations affected

New York, August 06, 2010 -- Moody's Investors Service assigned a B2 rating to Exide Technologies' (Exide) proposed $675 million of senior secured notes. In a related action Moody's affirmed the B3 Corporate Family and Probability of Default Ratings of Exide, and affirmed the ratings on the company's existing debt: asset based revolving credit facility at Ba2, senior secured term loans at Ba3, and senior secured junior-lien notes at B3. The rating outlook is changed to positive from stable.

The $675 million of new senior secured notes will be privately placed and are expected to be issued in two series, one maturing in 2015, and a second maturing in 2017. The net proceeds from the proposed notes will be used to repay outstandings under Exide's existing senior secured term loans, redeem the outstanding 10.5% senior secured junior-lien notes, and for general corporate purposes. The consummation of the notes offering is expected to be conditioned upon the company concurrently entering into a new senior secured asset-based revolving credit facility, as well as other customary conditions. The ratings on the existing asset based revolving credit facility, senior secured term loans, and senior secured junior-lien notes will be withdrawn upon their repayment.

Exide's B3 Corporate Family Rating incorporates the generally stable replacement demand characteristics of the aftermarket transportation markets offset by the cyclicality of the industrial battery markets. Exide's has implemented restructuring actions during the fiscal year ending March 2010 to help mitigate the global recessionary environment which has hit the top line with revenue reduced by 27% over the last two fiscal years. Yet, the rating benefits from the company's diverse customer mix and worldwide geographic profile. The rating also incorporates the challenges the company faces to replace lost business to competitors with profitable relationships with new customers.

The positive outlook reflects Moody's expectation that generally improving global economic conditions particularly in the U.S., combined with the company's improved operating efficiency will help to offset a recent customer loss and position the company to win new profitable business over the intermediate term. Exide recently announced that 30% of the lost business has been replaced with new customers. Restructuring actions in Europe are expected to partially mitigate the regions lagging economic recovery. We believe that these factors should serve to support improving credit metrics over the intermediate term.

Exide's liquidity as of June 30, 2010 consisted of cash of approximately $80.5 million and $117.9 million of availability under a $200 million asset based revolving credit facility maturing May 2012. Moody's anticipates that Exide will generate breakeven to modestly positive free cash flow over the next twelve months as global economies recover. Exide's existing credit agreement does not contain any financial maintenance covenants, although a springing fixed charge covenant of 1.0x becomes effective if availability under the revolving credit facility falls below $40 million. Moody's does not anticipate availability falling below this level over the next twelve-month period. The new senior secured notes are not expected to have financial maintenance covenants and the new asset based revolving credit facility is expected to have financial covenants similar to the existing facility. Alternative sources of liquidity are limited as essentially all of the company's assets secure its bank credit facilities and junior lien debt. The proposed senior secured notes and asset based revolving credit facility are expected to have similar conditions.

Ratings assigned:

B2 (LGD3 35%) to $675 million of senior secured notes due 2015 and 2017;

Ratings affirmed:

Exide Technologies

B3, Corporate Family Rating;

B3, Probability of Default Rating;

Ba2, $200 million asset based revolving credit facility;

B3 (LGD3, 47%), $290 million of senior secured junior-lien notes due March 2013;

Exide Technologies and its foreign subsidiary Exide Global Holdings Netherlands CV:

Ba3 (LGD2, 17%), $130 million senior secured term loan at Exide Technologies;

Ba3 (LGD2, 17%), $165 million senior secured term loan at Exide Global Holdings Netherlands CV.

The last rating action was on July 7, 2008 when the Corporate Family rating was raised to B3.

Exide Technologies' existing $60 million floating rate convertible subordinated note due September 2013 is not rated by Moody's.

Future favorable rating events could include further operational improvements resulting in higher margins and cash flow, and the achievement of debt reduction. Consideration for upward rating migration would arise if any combination of these factors were to increase EBIT/interest coverage consistently over 1.7x and result in leverage approaching 4.0x.

Future events that have the potential to lower Exide's outlook or ratings include lower global demand in the company's end markets, an inability to manage commodity cost fluctuations, lower operating performance due to the inability to offset lower demand with restructuring savings, market share losses, or a more competitive pricing environment. Consideration for a lower outlook or rating also could result from a deteriorating liquidity profile, or EBIT/interest coverage consistently below 1.0x.

The principal methodology used in rating Exide was Moody's the 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.

Exide, headquartered in Milton, GA, is one of the largest global manufacturers of lead acid batteries, with net sales approximating $3.7 billion. The company manufactures and supplies lead acid batteries for transportation and industrial applications worldwide. Revenues for the fiscal year ending March 31, 2010 were $2.7 billion.

New York
Andris G. Kalnins
Senior Vice President
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 Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's assigns B2 rating to Exide's new senior secured notes, outlook changed to positive
No Related Data.
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