Frankfurt am Main, March 26, 2020 -- Moody's Investors Service, ("Moody's") has
today placed the ratings of 14 European Automotive parts suppliers (collectively
"the companies") under review for downgrade. This includes
the following eight issuers: Aptiv Plc, Autoliv Inc,
Faurecia, Hella GmbH & Co KGaA, Kongsberg Automotive ASA,
Novem Group GmbH, Schaeffler AG and Valeo S.A.
Concurrently, Moody's downgraded the ratings of the following
six issuers by one notch: Adler Pelzer Holding GmbH's CFR
from B1 to B2, Garrett Motion's CFR from Ba3 to B1,
Gestamp Automocion, S.A.'s CFR from Ba2 to Ba3,
Grupo Antolin's CFR from B2 to B3, IHO-Verwaltungs
GmbH's CFR from Ba1 to Ba2, and ZF Friedrichshafen AG from
Baa3 to Ba1. As a result of the downgrades, Moody's has withdrawn
the issuer rating and assigned corporate family rating (CFR) to ZF Friedrichshafen
AG, in line with the rating agency's policy for non-financial
corporates with non-investment grade ratings downgraded from investment
grade ratings. The ratings of these six issuers are under review
for further downgrade.
Full details of the rating actions for the affected entities can be found
at the end of this press release.
"The rapid and widening spread of the coronavirus outbreak is creating
a severe and extensive credit shock for European automotive parts suppliers,"
said Matthias Heck, a Vice President and Senior Credit Officer at
Moody's. "We have downgraded ratings of companies which
were already weakly positioned in their respective ratings ahead of the
current market stress, and our review for downgrade processes will
focus on the impact on manufacturing operations, consumer demand,
as well as governmental support and mitigating measures being taken by
the individual issuers."
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price
declines are creating a severe and extensive credit shock across many
sectors, regions and markets. The combined credit effects
of these developments are unprecedented. The auto sector (and issuers
within other sectors that relay on the auto sector) has been one of the
sectors most significantly affected by the shock given its sensitivity
to consumer demand and sentiment. More specifically, the
weaknesses in the companies' credit profiles, including their
exposure to final consumer demand for light vehicles have left them vulnerable
to shifts in market sentiment in these unprecedented operating conditions
and the companies remain vulnerable to the outbreak continuing to spread.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Today's action reflects the impact on the companies of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
The six companies that have been downgraded today have been weakly positioned
in their respective ratings ahead of the current market stress and hence
had very limited ability to weather additional challenges on top of an
already weak sector environment.
The reviews for downgrade will consider (i) the outbreak's impact
on the manufacturing operations of the European automotive parts suppliers
and related issuers listed herein, as these issuers largely have
global operations. A number of automotive original equipment manufacturers
and auto parts suppliers have already temporarily closed facilities in
order to ensure the safety of their employees. The review will
assess the impact from facility closures and global automotive production
declines these issuers are experiencing and will experience in the coming
quarters. The review will also consider (ii) the lingering impact
of diminished consumer demand, resulting from consumer concerns
over contracting coronavirus, and regional government policies restricting
consumer movement over coming quarters, (iii) the impact of governmental
action to support corporates and consumers in the companies' main
markets, and (iv) the impact of potential self-help measures
of the individual issuers. The review will aggregate these effects
in conjunction with the liquidity profiles of these issuers placed under
review for downgrade. The level of cash, availability under
liquidity facilities, financial maintenance covenant pressure,
and the pressure of refinancing debt maturities coming due over the next
12-24 months will be major considerations in Moody's review.
Moody's expects to conclude the review within 90 days.
WHAT COULD CHANGE ADLER PELZER'S RATINGS UP/DOWN
Given the current market situation we do not anticipate any short term
positive rating pressure for Adler Pelzer. A stabilization of the
market situation leading to a recovery in metrics to pre-outbreak
levels could lead to positive rating pressure. More specifically
adjusted Debt/EBITDA would have to drop back sustainably below 4x with
an EBITA margin sustainably above 5%.
Further negative pressure would build if Adler Pelzer fails to return
to meaningful operating profit generation of the second half of 2020 allowing
it to stabilize its liquidity situation by reducing the cash burn rate.
A prolonged and deeper slump in demand than currently anticipated leading
to more balance sheet deterioration and a longer path to restoring credit
metrics in line with a B2 credit rating (EBITA margin at least 4%,
debt/EBITDA 5x) could also lead to further negative pressure on the rating.
WHAT COULD CHANGE GARRETT MOTION'S RATINGS UP/DOWN
Given the current market situation we do not anticipate any short term
positive rating pressure for Garrett Motion. A stabilization of
the market situation leading to a recovery towards metrics to pre-outbreak
levels could lead to positive rating pressure. More specifically
adjusted Debt/EBITDA would have to drop back sustainably below 4x with
an EBITA margin sustainably above 8%.
Further negative pressure would build if Garrett Motion fails to return
to meaningful operating profit generation of the second half of 2020,
thus sustaining adjusted debt/EBITDA above 5x and an adjusted EBITA margin
trending below 5%. Furthermore, a deterioration in
Garrett's liquidity profile would also excerpt negative ratings
pressure.
WHAT COULD CHANGE GESTAMP AUTOMOCION'S RATINGS UP/DOWN
Given the current market situation we do not anticipate any short term
positive rating pressure for Gestamp Automocion. A stabilization
of the market situation leading to a recovery in metrics to pre-outbreak
levels could lead to positive rating pressure. More specifically
adjusted Debt/EBITDA would have to drop back sustainably below 3.5x
with an EBITA margin sustainably above 6%.
Further negative pressure would build if Gestamp fails to return to meaningful
operating profit generation of the second half of 2020 allowing it to
stabilize its liquidity situation by reducing the cash burn rate.
A prolonged and deeper slump in demand than currently anticipated leading
to more balance sheet deterioration and a longer path to restoring credit
metrics in line with a Ba3 credit rating (EBITA margin at least 5%,
debt/EBITDA not exceeding 4.0x on a sustained basis) could also
lead to further negative pressure on the rating.
WHAT COULD CHANGE GRUPO ANTOLIN'S RATINGS UP/DOWN
Given the current market situation we do not anticipate any short term
positive rating pressure for Grupo Antolin. A stabilization of
the market situation leading to a recovery in metrics to pre-outbreak
levels could lead to positive rating pressure. More specifically
adjusted Debt/EBITDA would have to drop back sustainably below 5.5x
with an EBITA margin sustainably above 2.5%.
Further negative pressure would build if Grupo Antolin fails to return
to meaningful operating profit generation of the second half of 2020 allowing
it to stabilize its liquidity situation by reducing the cash burn rate.
A prolonged and deeper slump in demand than currently anticipated leading
to more balance sheet deterioration and a longer path to restoring credit
metrics in line with a B3 credit rating (EBITA margin at least 2%,
debt/EBITDA not exceeding 6.5x on a sustained basis) could also
lead to further negative pressure on the rating.
WHAT COULD CHANGE IHO VERWALTUNG'S RATINGS UP/DOWN
Moody's could downgrade IHO-V's ratings if its (1) net market value-based
leverage remains above 40% on a sustained basis (approximately
50%, based on share prices of Continental AG and Schaeffler
AG on March 24, 2020); (2) FFO interest cover deteriorates
below 2.0x (approximately 3.2x, based on proposed
dividends for 2019) on a sustained basis; (3) Moody's adjusted debt/EBITDA
remains above 3.0x (approximately 3.1x for 2019) sustainably
and Moody's adjusted EBITA margin fails to recover to above 8%
(approximately 6% in 2019), both based on INA-Holding
Schaeffler GmbH & Co. KG statements that fully consolidate
Schaeffler AG and Continental AG; or (4) liquidity deteriorates.
Given the current market situation we do not anticipate any short term
positive rating pressure. An upgrade of IHO-V's ratings
would require (1) a clearly formulated financial policy aimed to preserve
a conservative capital structure, (2) a market value-based
net leverage of 30% or less, and (3) FFO interest cover above
2.5x on a sustained basis. An upgrade would also require
(4) Moody's adjusted debt/EBITDA to be sustained below 2.5x and
Moody's adjusted EBITA margin to be improved to around 10%,
both based on INA-Holding Schaeffler GmbH & Co. KG's
financial statements that fully consolidate Schaeffler AG and Continental
AG. An upgrade would also require (5) improved reporting at IHO-V
level.
WHAT COULD CHANGE ZF FRIEDRICHSHAFEN'S RATINGS UP/DOWN
Given the current market situation we do not anticipate any short term
positive rating pressure for ZF Friedrichshafen. A stabilization
of the market situation leading to a recovery in metrics to pre-outbreak
levels could lead to positive rating pressure. More specifically
adjusted Debt/EBITDA would have to drop back sustainably below 3x with
an EBITA margin sustainably above 7%.
Further negative pressure would build if ZF fails to return to meaningful
operating profit generation of the second half of 2020. A prolonged
and deeper slump in demand than currently anticipated leading to more
balance sheet deterioration and a longer path to restoring credit metrics
in line with a Ba1 credit rating (EBITA margins of at least 5.0%;
debt/EBITDA not exceeding 3.5x on a sustainable basis) could also
lead to further negative pressure on the rating.
The principal methodology used in these ratings was Automotive Supplier
Methodology published in January 2020. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
LIST OF AFFECTED RATINGS
On Review for Downgrade:
..Issuer: Aptiv Plc
....Multiple Seniority Shelf, Placed
on Review for Downgrade, currently (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa2
..Issuer: Delphi Corporation
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa2
..Issuer: Valeo S.A.
....LT Issuer Rating, Placed on Review
for Downgrade, currently Baa3
....Commercial Paper, Placed on Review
for Downgrade, currently P-3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Downgrade, currently (P)Baa3
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3
..Issuer: Autoliv ASP, Inc.
....Senior Unsecured Commercial Paper,
Placed on Review for Downgrade, currently P-2
..Issuer: Autoliv, Inc.
....Senior Unsecured Commercial Paper,
Placed on Review for Downgrade, currently P-2
..Issuer: Faurecia
....LT Corporate Family Rating, Placed
on Review for Downgrade, currently Ba1
....Probability of Default Rating, Placed
on Review for Downgrade, currently Ba1-PD
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba1
..Issuer: HELLA GmbH & Co. KGaA
.... LT Issuer Rating, Placed on Review
for Downgrade, currently Baa1
.... ST Issuer Rating, Placed on Review
for Downgrade, currently P-2
....Senior Unsecured Bank Credit Facility,
Placed on Review for Downgrade, currently Baa1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa1
..Issuer: Novem Group GmbH
....LT Corporate Family Rating, Placed
on Review for Downgrade, currently Ba3
....Probability of Default Rating, Placed
on Review for Downgrade, currently Ba3-PD
....Backed Senior Secured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Ba3
..Issuer: Schaeffler AG
....LT Issuer Rating, Placed on Review
for Downgrade, currently Baa3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Downgrade, currently (P)Baa3
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3
..Issuer: Schaeffler Finance B.V.
....Backed Senior Secured Regular Bond/Debenture,
Placed on Review for Downgrade, currently Baa3
..Issuer: Kongsberg Automotive ASA
.... LT Corporate Family Rating, Placed
Under Review for Downgrade, currently B1
.... Probability of Default Rating,
Placed Under Review for Downgrade, currently B1-PD
..Issuer: Kongsberg Actuation Systems B.V.
....Backed Senior Secured Regular Bond/Debenture,
Placed Under Review for Downgrade, currently B1
Downgrades:
..Issuer: Gestamp Automocion, S.A.
.... LT Corporate Family Rating, Downgraded
to Ba3 from Ba2; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Downgraded to Ba3-PD from Ba2-PD; Placed Under Review
for further Downgrade
.... Backed Senior Secured Regular Bond/Debenture,
Downgraded to B1 from Ba3; Placed Under Review for further Downgrade
..Issuer: Gestamp Funding Luxembourg S.A.
.... Backed Senior Secured Regular Bond/Debenture,
Downgraded to B1 from Ba3; Placed Under Review for further Downgrade
..Issuer: Grupo Antolin-Irausa, S.A.
.... LT Corporate Family Rating, Downgraded
to B3 from B2; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Downgraded to B3-PD from B2-PD; Placed Under Review
for further Downgrade
.... Senior Secured Regular Bond/Debenture,
Downgraded to B3 from B2; Placed Under Review for further Downgrade
..Issuer: IHO Verwaltungs GmbH
.... LT Corporate Family Rating, Downgraded
to Ba2 from Ba1; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Downgraded to Ba2-PD from Ba1-PD; Placed Under Review
for further Downgrade
.... Senior Secured Regular Bond/Debenture,
Downgraded to Ba2 from Ba1; Placed Under Review for further Downgrade
..Issuer: TRW Automotive Inc.
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba1 from Baa3; Placed Under Review for further Downgrade
..Issuer: ZF Europe Finance B.V.
....Backed Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba1 from Baa3; Placed Under Review for further Downgrade
..Issuer: ZF North America Capital, Inc.
....Backed Senior Unsecured Regular Bond/Debenture,
Downgraded to Ba1 from Baa3; Placed Under Review for further Downgrade
..Issuer: Adler Pelzer Holding GmbH
.... LT Corporate Family Rating, Downgraded
to B2 from B1; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Downgraded to B2-PD from B1-PD; Placed Under Review
for further Downgrade
.... Senior Secured Regular Bond/Debenture,
Downgraded to B2 from B1; Placed Under Review for further Downgrade
..Issuer: Garrett Motion Inc.
.... LT Corporate Family Rating, Downgraded
to B1 from Ba3; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Downgraded to B1-PD from Ba3-PD; Placed Under Review
for further Downgrade
.... Speculative Grade Liquidity Rating,
Downgraded to SGL-4 from SGL-2
..Issuer: Garrett LX I SARL
....Backed Senior Unsecured Regular Bond/Debenture,
Downgraded to B3 from B2; Placed Under Review for further Downgrade
..Issuer: Garrett LX III SARL
....Senior Secured Bank Credit Facility,
Downgraded to B1 from Ba3; Placed Under Review for further Downgrade
..Issuer: Honeywell Technologies Sarl
....Backed Senior Secured Bank Credit Facility,
Downgraded to B1 from Ba3; Placed Under Review for further Downgrade
....Senior Secured Bank Credit Facility,
Downgraded to B1 from Ba3; Placed Under Review for further Downgrade
Assignments:
..Issuer: ZF Friedrichshafen AG
.... LT Corporate Family Rating, Assigned
Ba1; Placed Under Review for further Downgrade
.... Probability of Default Rating,
Assigned Ba1-PD; Placed Under Review for further Downgrade
Withdrawals:
..Issuer: ZF Friedrichshafen AG
.... Issuer Rating, Withdrawn ,
previously rated Baa3
Outlook Actions:
..Issuer: Aptiv Plc
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Delphi Corporation
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Valeo S.A.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Autoliv ASP, Inc.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Autoliv, Inc.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Faurecia
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Gestamp Automocion, S.A.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Gestamp Funding Luxembourg S.A.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Grupo Antolin-Irausa, S.A.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: HELLA GmbH & Co. KGaA
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: IHO Verwaltungs GmbH
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Novem Group GmbH
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Schaeffler AG
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Schaeffler Finance B.V.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: ZF Friedrichshafen AG
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: TRW Automotive Inc.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: ZF Europe Finance B.V.
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: ZF North America Capital, Inc.
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Adler Pelzer Holding GmbH
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Kongsberg Actuation Systems B.V.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Kongsberg Automotive ASA
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Garrett Motion Inc.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Garrett LX I SARL
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Garrett LX III SARL
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Honeywell Technologies Sarl
....Outlook, Changed To Rating Under
Review From Stable
REGULATORY DISCLOSURES
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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
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.
Matthias Heck, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
