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Rating Action:

Moody's assigns ratings to Remy International, Corporate Family Rating at B1

07 Dec 2010

Approximately $300 million of rated obligations affected

New York, December 07, 2010 -- Moody's Investors Service assigned first time ratings to Remy International, Inc. (Remy) -- Corporate Family and Probability of Default Rating, B1. In a related action, Moody's assigned a B1 rating to the company's new senior secured term loan B. The rating outlook is stable.

The following ratings were assigned:

Remy International, Inc.:

Corporate Family Rating, B1;

Probability of Default, B1;

B1 (LGD3, 45%), for the $300 million senior secured term loan B.

The $95 million asset based revolving credit facility is not rated.

RATINGS RATIONALE

The net proceeds of the new senior secured term loan along with borrowings under the revolving credit facility, and cash on hand will be used to refinance the company's existing term loan debt and pay related fees and expenses. Following the above refinancing, Remy is expected to redeem its existing preferred stock with the net proceeds of an approximate $237.0 million common stock rights offering. The term loan debt refinancing is expected to close in mid-December and the rights offering is expected to close in mid-January. The ratings assume the successful completion of both the existing term loan debt refinancing and redemption of preferred stock.

The B1 Corporate Family Rating reflects the company's strong credit metrics weighed by its modest revenue base and challenging liquidity profile. As part of Remy's emergence from Chapter 11 in December 2007, the company's debt was reduced by over $400 million or about 54%. The reduced debt burden combined with restructuring actions taken during and prior the Chapter 11 filing supported Remy's ability to endure the dramatic automotive industry downturn in 2009. The improving industry conditions in 2010 has allowed Remy to leverage its improved cost structure in an increasingly positive automotive production environment resulting in an LTM EBIT margin as of September 30, 2010 (including Moody's standard adjustments) of approximately 10.5%. Pro forma for the existing debt refinaincing, EBIT/interest approximated 2.6x and debt/EBITDA approximated 3.7x.

Remy's credit metrics are expected to continue to benefit from gradually recovering automotive production. Yet, Remy's modest revenue base and high customer concentration (the top 5 customers represent approximately 51% of revenues) highlight the business risks to the company's competitive position. In addition, Remy's extensive use of uncommitted accounts receivable factoring programs add liquidity risk to the company's financial profile.

The stable outlook incorporates Remy's strong credit metrics for the assigned rating and expectation of gradual improvement of automotive industry conditions. The company's capital structure should support a modest amount of additional leverage to support modest amounts of un-renewed factoring programs.

Remy is anticipated to have an adequate liquidity profile following the proposed recapitalization. The company is expected to have about $100 million of cash following the proposed common stock rights offering. In addition, recovering automotive industry conditions should support positive free cash flow generation. Further supporting Remy's liquidity profile is the proposed $95 million asset based revolving credit facility. Approximately $30.4 million of borrowings are expected under the facility following the transaction with about $4.8 million of issued letters of credit. However, Remy's utilization of factoring arrangements to support its financial flexibility is a limiting consideration on its liquidity profile as the inability to renew these factoring arrangement would materially impact the company's financial flexibility. As of September 30, 2010, gross amounts factored under these facilities was about $158.8 million. The asset based revolving credit will have a springing fixed charge coverage test of 1.1 to 1 when availability falls below certain levels to be determined. Financial covenants under the new term loan will be a maximum leverage test and a minimum interest coverage test. Alternate liquidity will be limited as essentially all the company's assets will secure the asset based revolver and term loan facilities.

Remy provides alternators, starters and hybrid motors for the heavy duty and light duty original equipment markets, as well as remanufactured alternators and starters to the aftermarket. Revenues in 2009 were $910 million.

The principal methodologies used in this rating were Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009, and Global Automotive Supplier Industry published in January 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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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.

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

New York
Andris G. Kalnins
Senior Vice President
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
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns ratings to Remy International, Corporate Family Rating at B1
No Related Data.
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