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Related Issuers
Rating Action:

Moody's raises Dana's ratings, Corporate Family Rating to B1

13 Jan 2011

Approximately $1.5 billion of rated debt affected

New York, January 13, 2011 -- Moody's Investors Service raised the ratings of Dana Holding Corporation's (Dana) - Corporate Family and Probability of Default Ratings to B1 from B3. In a related action, Moody's raised the ratings on the senior secured asset based revolving credit facility to Ba1 from Ba3, and the senior secured term loan to Ba2 from B1. The Speculative Grade Liquidity Rating also was affirmed at SGL-2. The rating outlook is stable.

Ratings raised:

Probability of Default Rating, to B1 from B3;

Corporate Family Rating, to B1 from B3;

$650 million senior secured asset based revolving credit facility, to Ba1 (LGD 2, 19%) from Ba3 (LGD2, 24%);

$869 million (originally $1.4 billion) senior secured term loan, to Ba2 (LGD2, 26%) from B1 (LGD3, 30%);

Ratings affirmed:

Speculative Grade Liquidity rating at SGL-2.

RATING RATIONALE

The upgrade of Dana's Corporate Family Rating to B1 incorporates the company's improved performance over the recent quarters and our expectation that this improvement will be sustained over the intermediate-term. Dana's EBIT margin has improved to 5% (including Moody's standard adjustments) in the quarter ending September 30, 2010, compared to a breakeven margin in the prior year period. This improvement reflects the benefits from the significant restructuring actions in the prior year and recovering global automotive demand. The company's performance and balance sheet were strengthened further during 2010 by debt reduction from the divestiture of its Structures business. As of September 30, 2010, cash balances of $1.1 billion exceed funded debt. For the LTM period ending September 30, 2010, Dana's EBITA/interest approximated 1.3x, supported by stronger results in the second and third quarters of 2010; Debt/EBITDA approximated 4.4x.

Dana is well positioned to benefit from further revenue growth with improvement in global economies and further customer growth. U.S. retail demand is expected to increase to about 13.5 million units in 2011 or about 17% above 2010 levels. Western European demand is expected to modestly improve in 2011 over 2010 units sales. Dana's light vehicle business (about 59% of total sales) is largely North American and non-European and also should benefit from regional growth in Asia and South America. The ratings also incorporate our expectation of improving commercial vehicle production in North America. About 23% of Dana's revenues are commercial vehicle related, and are largely North American. Yet, Dana's off-highway business (about 18% of revenues) is largely exposed to the European markets which are expected to lag the global trend in economic recovery.

Dana continues to have a high customer concentration with Ford (about 19%). However, its next largest customers are Paccar (5%) and Hyundai (5%) which highlights the company's strategy for customer and geographic diversity. The market for axles, driveshafts, sealing products, and thermal products is expected to remain competitive. Yet, since emerging from Chapter 11 in January 2008, Dana has maintained a solid market position. Dana recently announced net new business wins of approximately $846 million.

The stable rating outlook considers Dana's improving operational performance, supported by a stabilizing global economy and announced net new business wins. These factors are balanced by expectations of additional restructuring actions in 2011 while reinstating certain compensation and benefit programs; other increases in cash requirements to support new business growth, including capital reinvestment and staffing; and commodity cost pressures as global economies recover. The outlook also incorporates our expectation of continued strong cash balances available for further debt paydown, after considering the recently announced agreement to use about $120 million of cash to increase a joint venture ownership in China.

The Speculative Grade Liquidity Rating of SGL-2 reflects good liquidity over the next twelve months supported by strong cash balances and our expectation of positive free cash flow generation over the near-term. The company's cash balances at September 30, 2010 were approximately $1,137 million ($96 million restricted). Dana's positive free cash flow expectation incorporates higher required working capital needs and higher reinvestment in plant and equipment to support new business growth as industry conditions improve. External liquidity is provided by the $650 million asset based revolving credit with availability at September 30, 2010 of approximately $238 million, based on borrowing base limitations, and $146 million of outstanding letters of credit. Dana also maintained an undrawn European receivables loan facility of Euro 170 million, maturing in July 2012. Accounts receivable balances available as collateral under the program would have supported a US$ equivalent of $96 million in borrowings. Dana is expected to have ample covenant cushion under the term loan facility despite test level step-downs. There is capacity to incur up to $275 million of additional debt in its foreign subsidiaries.

Factors that could lead to a higher outlook or ratings include sustained revenue growth leading to improved operating performance generating EBIT/interest coverage consistently over 2.0 times, and consistent positive free cash flow generation, while maintaining adequate liquidity.

Future events that have potential to drive Dana's outlook or ratings lower include the inability to win new contracts, production volume declines at the company's OEM customers, and material increases in raw materials costs that cannot be passed on to customers or mitigated by restructuring efforts resulting EBIT/interest coverage approaching 1.5 times. Other developments that could lead to a lower outlook or ratings include deteriorating leverage or liquidity.

The last rating action for Dana Holding Corporation was on June 14, 2010 when the Corporate Family Rating was affirmed at B3 and the rating outlook changed to positive.

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

Dana, headquartered in Maumee, Ohio, is a world leader in the supply of axles, driveshafts, sealing, thermal management products, as well as genuine service parts. The customer base includes virtually every major vehicle in the global automotive, commercial vehicle, and off-highway markets. The company employs approximately 21,000 people in 26 countries. Revenues in 2009 were $5.2 billion.

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, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

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

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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
Michael J. Mulvaney
MD - Corporate Finance
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
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's raises Dana's ratings, Corporate Family Rating to B1
No Related Data.
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