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Rating Action:

Moody's changes Energy Acquisition Company, Inc.'s ratings outlook to stable, affirms all existing ratings

22 Apr 2021

New York, April 22, 2021 -- Moody's Investors Service ("Moody's") changed the ratings outlook for Energy Acquisition Company, Inc. (dba Electrical Components International, Inc., "ECI") to stable from negative. Concurrently, Moody's affirmed the company's B3 corporate family rating (CFR) and B3-PD probability of default rating, along with its B2 first lien senior secured rating and Caa2 senior secured second lien rating. Moody's also assigned a B2 rating to the new $100 million of incremental first lien term loan. Proceeds from the term loan will fund acquisition of three companies serving automotive, defense, appliance and industrial end markets.

"Stronger customer demand, recent market share gains and deleveraging from the prospective acquisitions will drive stronger credit metrics in 2021 and into 2022", says Shirley Singh, Moody's lead analyst for the company.

Moody's anticipates that successful integration of these companies will reduce leverage to 7.0x (on pro forma basis) from current levels of 7.7x (as of December 2020). Liquidity will remain adequate as internal cash generation continues to be constrained by higher working capital usage and persisting COVID related cost.

The following rating actions were taken:

Affirmations:

..Issuer: Energy Acquisition Company, Inc.

.... Corporate Family Rating, Affirmed B3

.... Probability of Default Rating, Affirmed B3-PD

....Senior Secured 1st Lien Bank Credit Facility, Affirmed B2 (LGD3)

....Senior Secured 2nd Lien Bank Credit Facility, Affirmed Caa2 (LGD5)

Assignments:

..Issuer: Energy Acquisition Company, Inc.

....Senior Secured 1st Lien Bank Credit Facility, Assigned B2 (LGD3)

Outlook Actions:

..Issuer: Energy Acquisition Company, Inc.

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

ECI's B3 CFR reflects the company's modest scale with relatively high pro forma adjusted debt-to-EBITDA of 7.0x as of December 2020 (Moody's adjusted for acquisitions with add-backs for restructuring, COVID and acquisition related costs). The company serves cyclical sectors with a noteworthy concentration in the North American and European white goods appliances sector. The ratings are supported by the company's leading market position as a wire harness manufacturer in North America and Europe, as well as its low-cost manufacturing capabilities which provides a key competitive advantage.

The stable outlook reflects Moody's expectation that ECI's leverage over the course of 2021 will fall below 7.0x through a combination of organic and acquisition-related earnings growth. The outlook also assumes that the company will maintain adequate liquidity over the course of next 12-18 months.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Ratings could be downgraded if Moody's expects debt-to-EBITDA to be sustained above 7.5x as a result of weaker demand, operational disruption or loss of a major customer. The ratings could be downgraded if liquidity weakens for any reason, including sustained negative free cash flow or increased revolver reliance. A sizable debt-financed acquisition or dividend could also result prompt a ratings downgrade.

Ratings could be upgraded if ECI is able to deleverage such that Moody's adjusted debt-to-EBITDA below 6.0x and interest coverage (EBITA-to-Interest) approaches 2.0x. Also, the company will have to maintain good liquidity prior to an upgrade.

Headquartered in St. Louis, Missouri, Energy Acquisition Company, Inc. (dba Electrical Components International, Inc.) is a leading manufacturer of wire harnesses and a value-added assembly services provider in North America, Europe, Asia and South America. The company serves several industries including consumer appliances, automotive, specialty transportation, HVAC, construction and agricultural equipment. ECI is owned by the private equity firm Cerberus Capital Management. Sales for the last twelve months ended December 2020 were $915 million.

The principal methodology used in these ratings was Manufacturing Methodology published in March 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1206079. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Shirley Singh
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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