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Rating Action:

Moody's raises TRW's Corporate Family Rating to B1, rating outlook positive

04 Aug 2010

Approximately $3.1 billion of rated debt obligations affected

New York, August 04, 2010 -- Moody's Investors Service raised TRW Automotive, Inc.'s (TRW) Corporate Family and Probability of Default ratings to B1 from B2. Moody's also raised the ratings of the senior secured credit facilities to Ba1 from Ba2, and raised the ratings for the guaranteed senior unsecured notes to B2 from B3. The Speculative Grade Liquidity Rating also was affirmed at SGL-2. The rating outlook is positive .

The upgrade of TRW's Corporate Family Rating (CFR) to B1 reflects the company's strong operating performance in the first half of 2010 and the expectation that it will continue to benefit from recovery in the automotive industry even though normal seasonal trends and sluggishness in European markets will temper the pace of financial improvement in the second half of the year. The company's performance in the first half of 2010 was supported by recovering consumer demand in North America, automotive dealer inventory restocking, and cost structure improvement actions taken in the recent years. For the first six months of 2010, the company's reported operating profit of $622 million demonstrated a sharp improvement from the $81 million loss recorded in the prior year, and LTM EBIT/Interest (including Moody's standard adjustments) was strong at about 3.2x. Favorable business conditions have also supported TRW's free cash flow generation in the first half of 2010 facilitating debt paydowns, with reported debt of about $2.0 billion at July 2, 2010, down from over $2.4 billion at the prior year end.

TRW's established position as an important supplier to the automotive industry, with key technologies in safety products, and a sound level of geographic, customer, and product diversification is expected to support the company's competitive position over the long-term. As auto demand strengthens, the company should enjoy favorable revenue trends and, in conjunction with a more lean cost structure post restructuring actions taken over the last several years, earnings and cash flow generation should show continued strength. Yet, industry seasonality, expected softness in Europe, and the impact of recent currency fluctuations is expected to soften the pace of this improvement in the second half of 2010. Moody's expects European automobile registrations to weaken in the second half of 2010 as the benefits of 2009 government sponsored scrappage programs will not be repeated. Although this will cause some headwinds for TRW's operating results, Moody's believes that the company will sustain operating metrics supportive of the B1 rating.

The positive outlook considers that even with the challenges of recovering global economies TRW's credit metrics over the intermediate term should continue to improve with growth in global automotive production expected in 2011. Moreover, Moody's believes that TRW's improved cost structure should continue to support the company's operating performance.

TRW's is expected to continue to operate with a good liquidity profile over the next twelve months reflected by the rating of SGL-2. As of July 2, 2010 cash and cash equivalent balances were $767 million. The company's free cash flow over the next twelve months is expected to be modestly positive inclusive of a normal seasonal cash burn during the first quarter of 2011. Improved operating performance will also support higher levels of capital expenditures. TRW's liquidity position also is supported by a $1.256 billion revolving credit facility. As of July 2, 2010, the revolving credit facility was unfunded with $55 million of issued letters of credit. The majority of the committed facility is expected to remain available over the next twelve months providing ample funding capacity for the company's needs. The financial covenant cushions over the near-term are expected to benefit from the company's recent strong quarterly performance allowing TRW full access to the revolver availability. Alternative liquidity arrangements will continue to be limited by the current bank liens over substantially all of the company's domestic assets and lien baskets under the unsecured notes.

Ratings raised:

Corporate Family Rating, to B1 from B2;

Probability of Default Rating, to B1 from B2;

$1.256 billion combined senior secured domestic and global revolving credit facilities, to Ba1 (LGD1, 7%) from Ba2 (LGD1, 8%);

$225 million senior secured term loan A2, to Ba1 (LGD1, 7%) from Ba2 (LGD1, 8%);

$500 million senior unsecured notes due 2014, to B2 (LGD4 60%) from B3 (LGD4, 61%);

Euro 275 million senior unsecured notes due 2014, to B2 (LGD4 60%) from B3 (LGD4, 61%);

$600 million senior unsecured notes due 2017, to B2 (LGD4 60%) from B3 (LGD4, 61%);

$250 million senior unsecured notes due 2017, to B2 (LGD4 60%) from B3 (LGD4, 61%);

Ratings affirmed:

Speculative Grade Liquidity Rating, at SGL-2

The $259 million of exchangeable notes are not rated by Moody's.

The last rating action was on March 4, 2010 when TRW's Corporate Family Rating was raised to B2 and the rating outlook changed to positive.

Future events that have the potential to improve TRW's ratings include: further improvement in production levels in the automotive markets and improved operating margins resulting from new business wins or productivity improvements. Consideration for a higher ratings could arise if these factors were to lead to EBIT margins approaching the high single digits, and future quarterly EBIT/Interest coverage consistently above 2.3x while maintaining adequate liquidity.

Consideration for downward outlook or rating migration would arise if industry conditions were to deteriorate without sufficient offsetting restructuring actions or savings by the company, or if TRW is unable to maintain adequate liquidity levels to operate through a prolonged industry downturn.

The principal methodology used in rating TRW was Moody's the 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.

TRW Automotive, Inc., headquartered in Livonia, MI, is among the world's largest and most diversified suppliers of automotive systems, modules, and components to global vehicle manufacturers and related aftermarket. The company has four operating segments: Chassis Systems, Occupant Safety Systems, Automotive Components, and Electronics. Its primary business lines encompass the design, manufacture, and sale of active and passive safety related products. Revenues in 2009 were approximately $11.6 billion.

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
USA

Moody's raises TRW's Corporate Family Rating to B1, rating outlook positive
No Related Data.
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