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Rating Action:

Moody's raises the ratings of Hayes Lemmerz, Corporate Family Rating at B2

03 Feb 2011

Approximately $200 million of debt affected

New York, February 03, 2011 -- Moody's Investors Service raised the ratings of HLI Operating Company, Inc. -- Corporate Family and Probability of Default Ratings, to B2 from B3. HLI Operating Company is the U.S. operating company of Hayes Lemmerz International, Inc. (Hayes Lemmerz). In a related action Moody's raised the ratings of the senior secured $80 million term loan to HLI Operating Company (HLI) and the $120 million term loan to Hayes Lemmerz Finance LLC - Luxembourg S.C.A to B1 from B2. The rating outlook is stable.

The following ratings were raised:

HLI Operating Company, Inc.

Corporate Family Rating, to B2 from B3;

Probability of Default, to B2 from B3;

$80 million senior secured new money term loan facility, to B1 (LGD3, 35%) from B2 (LGD3, 35%);

Hayes Lemmerz Finance LLC - Luxembourg S.C.A.

$120million senior secured new money term loan exit facility, to B1 (LGD3, 35%) from B2 (LGD3, 35%);

RATING RATIONALE

The upgrade of Hayes Lemmerz' Corporate Family Rating to B2 reflects the company's better than anticipated operating performance since emerging from Chapter 11 in December 2009. The company's performance benefited from better than expected automotive demand, particularly in Europe (about 56% of revenues). The company's performance also benefitted from a better product mix in the first half of 2010 supported by a greater share of larger cars sold carrying higher revenue per wheel, and strong automotive exports from Europe. Hayes Lemmerz' exposure to North America (about 17% of revenues) also is contributing to the company's growth as industry unit retail sales in 2010 improved over 11% above 2009 levels. The company also benefited from recovering commercial production (about 30% of revenues). With stronger sales, Hayes Lemmerz was able to leverage cost structure improvements enacted over the prior years, which included reductions in labor, the sale of non-core operations and moving manufacturing operations to low cost countries. These actions have led to an increase in the company's EBIT margins (as adjusted by Moody's), above those experienced prior the industry downturn in 2009.

Hayes Lemmerz emerged from its voluntary Chapter 11 reorganization on December 21, 2009. Through the reorganization process, the company reduced its pre-petition debt to about $240 million from about $720 million. Hayes Lemmerz also reduced its legacy retiree medical and pension liabilities in the U.S. to less than $75 million from about $250 million. These capital structure changes in combination with the improved operating performance are generating financial metrics supportive of the higher rating.

The stable rating outlook incorporates Moody's expectation that Hayes Lemmerz' credit metrics should remain strong for the assigned rating as global automotive and commercial vehicle markets continue to improve. The company is expected to benefit from improving automotive and commercial vehicle demand in North America. Yet, modest revenue growth is expected in Europe as the region continues to lag global economic recovery levels. In addition, profit margins may be challenged by increasing raw material prices (largely steel), and incremental employee costs needed to support high growth levels. In addition, with the current ownership of Hayes Lemmerz in the hands of certain of the prepetition debt holders, there is a likelihood of the capital structure evolving over the intermediate-term as the industry recovers.

Hayes Lemmerz is expected to have adequate liquidity over the next twelve months supported by its large cash balances and modest free cash flow generation expected over the near-term. The lack of a committed multi-year revolving credit facility continues to be a detriment to the company's liquidity profile. Yet, Hayes Lemmerz is expected to build on its recent operating performance through fiscal 2011 and generate modest positive free cash flow after capital expenditures and higher levels of working capital. This performance should support ample covenant cushion over the next twelve months. Alternate liquidity is limited as essentially all of the company's assets secure the credit facilities.

The last rating action was January 6, 2010 when the B3 Corporate Family rating was assigned.

Hayes Lemmerz International, Inc., located in Northville, MI, is a leading worldwide producer of aluminum and steel wheels for passenger cars and light trucks and of steel wheels for commercial trucks and trailers. The Company has global operations with 20 facilities, including business and sales offices and manufacturing facilities located in 12 countries around the world. Hayes Lemmerz sells its products to every major Original Equipment Manufacturer.

The principal methodologies used in this rating were Global Automotive Supplier Industry published in January 2009, and Probability of Default Ratings and Loss Given Default Assessments published in June 2009.

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.

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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 the ratings of Hayes Lemmerz, Corporate Family Rating at B2
No Related Data.
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