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Rating Action:

Moody's assigns Ba3 rating to Case New Holland notes.

Global Credit Research - 22 Jun 2010

Approximately $1 billion of notes rated

New York, June 22, 2010 -- Moody's Investors Service assigned a Ba3 rating to the $1 billion of notes issued by Case New Holland Inc. (Case) which are guaranteed by its parent company CNH Global NV (CNH) and by its direct and indirect subsidiaries. Moody's also affirmed CNH's existing ratings -- Ba3 Corporate Family Rating and Probability of Default Rating, and SGL-3 Speculative Grade Liquidity Rating. The rating outlook remains stable.

Proceeds of the issuance will be used to redeem approximately $500 million in outstanding notes and repay a portion of the approximately $2.4 billion of debt due to Fiat SpA, which is the 90%-owner of CNH.

The Ba3 rating recognizes CNH's weak operating performance and stressed credit metrics in the aftermath of the severe downturn in global construction equipment markets and the slowdown in agricultural equipment demand. However, the rating also anticipates that the company's performance will continue to strengthen through 2011 as a result of a gradual recovery in both sectors and the significant restructuring initiatives undertaken by CNH in its construction equipment operations. Moreover, CNH continues to enjoy a globally competitive position in the farm equipment sector which benefits from favorable long-term growth fundaments. In addition, the farm equipment sector, which accounts for over 70% of CNH's industrial revenues and 80% of its assets, has oligopolistic characteristics with only three global competitors -- CNH, Deere & Company, and AGCO. This should contribute to a relatively favorable pricing environment.

The Ba3 rating also reflects Moody's assessment of the stand-alone credit quality of CNH. Although CNH is 90%-owned by Fiat (Ba1/negative), Fiat has not provided any formal support for CNH in the form of a legally enforceable support agreement or guarantee. Consequently, the CNH rating does not reflect any material lift or benefit from the Fiat ownership. For this reason, the proposed separation of Fiat into an automotive group and an industrial group should not, by itself, significantly alter CNH's operating fundamentals, competitive position, or debt servicing capacity.

The ultimate financial structure of the automotive and industrial groups has not yet been determined, and may not be finalized for several months. The final structure, to the extent that its materially alters CNH's asset and liability profile, or its liquidity position, could have an impact on CNH's credit quality and rating. As the details of this structure become more clearly defined, Moody's will assess their potential impact on CNH. Some of the factors that will be considered include: 1) any increase or decrease in the total amount of debt that must be serviced by CNH and CNH Capital (currently $14.9 billion); 2) the strategy for refunding any CNH debt owed to Fiat (currently $2.4 billion); 3) the disposition of CNH cash deposits that are held at Fiat (currently $2.2 billion); 4) the availability of committed credit facilities to CNH which are now shared with Fiat; and, 5) the potential amount of debt at Fiat Industrial that might require ongoing dividends from CNH in order to be serviced. Case New Holland's note issuance and the related repayment of debt owed to Fiat are preliminary elements of the separation process.

Aside from the resolution of the Fiat/CNH separation, the key driver of CNH's rating will be the pace and degree to which it can strengthen its credit metrics through 2011. For 2009 the company's financial performance was very weak with EBITA/interest of about .7x and debt/EBITDA over 10x. During 2010 we expect that a moderate recovery in the agricultural equipment and construction equipment markets, combined with the benefits of restructuring initiatives, will result in metrics improving to levels approximating the following: EBITA/interest of 2.5x; debt/EBITDA of 4.0x; and free cash flow of $500 million. Should CNH's performance not remain on track for generating metrics approximating these levels, the rating could come under pressure. It will also be important for the company's finance operations to maintain continued access to the securitization market, to preserve its leverage near the current level of 6.5:1, and to continue improving the past-due and charge-off performance of its construction equipment receivable portfolio.

CNH's SGL-3 Speculative Grade Liquidity rating indicates adequate liquidity over the coming twelve months, and is supported by the company's $3 billion cash position. One factor which may limit potential improvement in this rating is the finance operation's need to maintain sizable and regular access to the ABS market in order to fund its portfolio and provide adequate retail and wholesale funding for the industrial operations.

The last rating action for CNH was an assignment of Ba3 to Case New Holland on August 11, 2009.

The principal methodology used in rating CNH was the Heavy Manufacturing Methodology, published in November 2009, which can be found at 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.

Case New Holland Inc. is a wholly-owned subsidiary of CNH Global N.V. which is headquartered in the Netherlands. CNH is a leading global producer of agricultural and construction equipment.

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

New York
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Ba3 rating to Case New Holland notes.
No Related Data.
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