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Rating Action:

Moody's raises American Axle's Corporate Family Rating to B2, outlook Stable

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.

Ratings raised:

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 (LGD2, 17%)

Unsecured guaranteed notes, to B3 (LGD5, 74%) from Caa2 (LGD5 76%)

Ratings affirmed:

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.

New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Timothy L. Harrod
Vice President - Senior Analyst
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
USA

Moody's raises American Axle's Corporate Family Rating to B2, outlook Stable
No Related Data.
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