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Global Credit Research - 03 Aug 2010
Approximately $1.3 billion of rated obligations affected
New York, August 03, 2010 -- Moody's Investors Service raised American Axle & Manufacturing Holdings,
Inc.'s ("Holdings") Corporate Family Rating (CFR) and Probability
of Default Rating (PDR) to B2 from Caa1. In a related action,
the rating on American Axle & Manufacturing, Inc.'s (American
Axle) senior secured note was raised to Ba2 from B1, and the ratings
on the unsecured guaranteed notes and the unsecured guaranteed convertible
notes were raised to B3 from Caa2. The Speculative Grade Liquidity
Rating was affirmed at SGL-3. The rating outlook is Stable.
The raising of American Axle's CFR rating to B2 reflects the company's
improved operating performance over the past two quarters and Moody's
belief that this improvement will be sustained over the intermediate term,
supported by stable automotive vehicle production in North America and
cost structure improvements completed by the company in 2009. These
conditions no longer support the default risk indicated by the Caa rating.
For the LTM period ending June 30, 2010, American Axles EBIT/Interest
coverage (including Moody's adjustments) approximated 1.1x,
while Debt/EBITDA approximated 4.8x. These LTM metrics are
expected to improve through the year. While customer concentrations
remain high to GM and Chrysler (approximately 78% and 8%
of revenues for 2009, respectively), GM's improving
profitability and stabilizing market share for its retained product lines
partially mitigate this risk. Further, gradually improving
domestic economic conditions and relatively low gasoline prices appear
to be supporting sales of SUVs and light trucks. American Axle's
major platforms continue to consist of SUVs and light trucks. However,
Moody's believes the consumers' appetite for smaller cars is likely
to grow over the intermediate term. American Axle also has stated
that, as a result of achieved permanent structural cost reductions,
the company's operating breakeven level is now down to a U.S.
SAAR equivalent of approximately10 million vehicle units. This
factor combined with our expectation of an 11.5 million U.S.
SAAR in 2010 should support improved profitability over the near-term.
The stable rating outlook incorporates Moody's expectation of a gradually
improving operating performance from stronger North American automotive
production levels in 2010 and into 2011. Over the intermediate-term
American Axle's customer diversity is expected to benefit from a strong
backlog of business which should increase penetration with other auto
makers and geographic regions and further diversify the company's
sales into passenger cars and cross-over vehicles.
American Axle's is expected to maintain an adequate liquidity profile
over the next twelve months as indicated in the Speculative Grade Liquidity
Rating of SGL-3. Cash balances at June 30, 2010 were
$239 million are expected to be sufficient to accommodate working
capital and capital expenditure needs over the near-term.
Liquidity is supported by availability under the $296 million revolving
credit facility at June 30, 2010 of $263 million, net
of $34 million of letters of credit. The commitments under
the revolving credit reduces to $243 million in December 2011 and
will mature in June 2013. The company also maintains a $100
million committed second lien facility from GM, unused at June 30,
2010, which matures in December 2013. Principal financial
covenants under the revolving credit facility include a secured debt/EBITDA
test, and an EBITDA/interest expense test. American Axle's
improvement in structural costs and recovering North American production
volumes should provide ample covenant cushion and access the vast majority
of the revolving credit facility over the near-term. Availability
under the revolving credit is governed by a collateral coverage test.
The security provided to the lenders as part of the bank credit facility
limits the company's alternate sources of liquidity.
American Axle & Manufacturing Holdings, Inc.
Corporate Family Rating, to B2 from Caa1
Probability of Default Rating, to B2 from Caa1
Unsecured guaranteed convertible note, to B3 (LGD5, 74%)
from Caa2 (LGD5 76%)
American Axle & Manufacturing, Inc.
Senior secured guaranteed note, to Ba2 (LGD2 16%) from B1
Unsecured guaranteed notes, to B3 (LGD5, 74%) from
Caa2 (LGD5 76%)
American Axle & Manufacturing Holdings, Inc.
Speculative Grade Liquidity Rating, SGL-3
Holdings' obligations are guaranteed by American Axle and vice versa.
The last rating action was on March 1, 2010 when the Corporate Family
Rating was raised to Caa1 and the outlook changed to positive.
The principal methodology used in rating American Axle was Moody's Global
Auto Supplier Industry Methodology, published in January 2009 and
available on 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. For additional information, please refer
to our Credit Opinion of American Axle published on Moodys.com.
American Axle & Manufacturing, Inc., headquartered
in Detroit, MI, is a world leader in the manufacture,
design, engineering and validation of driveline systems and related
components and modules, chassis systems, and metal formed
products for light truck, SUV's and passenger cars. The company
has manufacturing locations in the USA, Mexico, the United
Kingdom, Brazil, China, Poland, and India.
The company reported revenues of $1.5 billion in 2009.
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Timothy L. Harrod
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's raises American Axle's Corporate Family Rating to B2, outlook Stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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