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Global Credit Research - 10 Jan 2011
$675 million of rated obligations affected
New York, January 10, 2011 -- Moody's Investors Service assigned a B2 rating to Exide Technologies'
(Exide) proposed $675 million of senior secured notes and affirmed
the B3 Corporate Family and Probability of Default Ratings of Exide.
In a related action, the ratings on the company's existing debt
were affirmed and will be withdrawn upon repayment from the net proceeds
of the new senior secured note. The rating outlook is positive.
The $675 million of new senior secured notes will mature in 2018.
The net proceeds from the proposed notes will be used to repay 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 $200
million senior secured asset-based revolving credit facility,
as well as other customary conditions.
B2 (LGD3 33%) to the new $675 million of senior secured
notes due 2018;
B3, Corporate Family Rating;
B3, Probability of Default Rating;
Positive Rating Outlook
Ba2, to the existing $200 million asset based revolving credit
facility, this rating will be withdrawn upon replacement;
B3 (LGD3, 45%), to the $290 million of senior
secured junior-lien notes due March 2013, this rating will
be withdrawn upon repayment;
Exide Technologies and its foreign subsidiary Exide Global Holdings Netherlands
Ba3 (LGD2, 17%), to the $130 million senior
secured term loan at Exide Technologies, this rating will be withdrawn
Ba3 (LGD2, 17%), to the $165 million senior
secured term loan at Exide Global Holdings Netherlands CV, this
rating will be withdrawn upon repayment.
Exide's B3 Corporate Family Rating continues to incorporate the company's
leveraged profile, cyclical industry characteristics, and
raw material pricing pressure. Upon completion of the discussed
refinancing, Debt/EBITDA will increase slightly to about 5.0x
(including Moody's standard adjustment) from about 4.6x,
pro forma for the LTM period ending September 30, 2010. Approximately
65% of Exide's revenues are derived in the transportation
segment with about 85% of this business related to the more stable
replacement aftermarket. However, the remainder of Exide
revenues are affected by the cyclical industrial industries in Europe
and ROW (about 71% of industrial segment revenues) and North America
(about 29%). The ratings benefit from most of Exide's North
American lead requirements being supplied by owned lead recycling plants.
However, the company's European operations are largely supplied
through third parties, exposing the company to increasing lead prices.
The rating also incorporates the challenges the company faces to replace
lost business to competitors with profitable relationships with new customers.
The positive rating outlook reflects Moody's expectation of generally
improving global economic conditions, particularly in the U.S.,
combined with Exide's improved cost structure following prior year
restructuring actions, and the company's ability to mitigate
raw material cost through price escalating arrangements with its OEM customers
and other pricing action. These factors along with additional business
should generate improving credit metrics over the intermediate-term.
Exide's liquidity as of September 30, 2010 consisted of cash of
approximately $77.4 million and $126.6 million
of availability under the existing $200 million asset based revolving
credit facility maturing May 2012. Upon completion of the proposed
note offering Exide's cash balances are expected to increase by
about $73 million. 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 asset based 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. The proposed
senior secured notes and asset based revolving credit facility are expected
to have similar conditions.
The last rating action was on August 13, 2010 when the B3 Corporate
Family rating was affirmed.
Exide Technologies' existing $60 million floating rate convertible
subordinated note due September 2013 is not rated by Moody's.
Future favorable rating events 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
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
The principal methodologies used in this rating 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.
Exide, headquartered in Milton, GA, is one of the largest
global manufacturers of lead acid batteries. 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.
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 information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Timothy L. Harrod
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns B2 rating to Exide's new senior secured notes
250 Greenwich Street
New York, NY 10007
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