Fitch Downgrades Hayes Lemmerz's IDR to 'CCC'; Remains on Watch Negative
Fitch Downgrades Hayes Lemmerz's IDR to 'CCC'; Remains on Watch Negative
Thu Feb 26 09:27:00 2009
EST
NEW YORK, Feb 26, 2009 (BUSINESS WIRE) --
Fitch Ratings has downgraded the Issuer Default Ratings (IDRs) and
outstanding debt ratings of Hayes Lemmerz International Inc. (HAYZ) and
its subsidiaries as follows:
Hayes Lemmerz International, Inc.
--IDR to 'CCC' from 'B-';
HLI Operating Company, Inc. (HLI Opco)
--IDR to 'CCC' from 'B-';
--Senior secured revolving credit facility to 'B-/RR3' from 'B+/RR2';
Hayes Lemmerz Finance - Luxembourg S.A. (European Holdco)
--IDR to 'CCC' from 'B-';
--Senior secured revolving credit facility to 'B-/RR3' from 'B+/RR2';
--Senior secured Euro synthetic LOC facility to 'B-/RR3' from 'B+/RR2';
--Senior secured Euro term loan to 'B-/RR3' from 'B+/RR2';
--Senior unsecured Euro notes to 'C/RR6' from 'CCC/RR6'.
All ratings remain on Rating Watch Negative, where they were originally
placed on Dec. 11, 2008. Fitch's actions affect approximately $570
million of balance sheet debt.
The downgrades reflects Fitch's expectations for a deep and extended
decline in global auto volumes and the terms of the amended credit
facility which only provides HAYZ covenant relief for a year. Fitch
expects every major region of the world to experience a decline in sales
in 2009, which will pressure all auto suppliers.
The Rating Watch Negative was discussed in the Dec. 11, 2008 Fitch
commentary titled 'Fitch Places Seven U.S. Auto Suppliers on Rating
Watch Negative.' As discussed in the aforementioned commentary, the
Rating Watch Negative is based on the uncertain longer-term federal
assistance for the U.S. original equipment manufacturers (OEMs) and the
impact of a potential bankruptcy filing by General Motors. In the event
of a General Motors bankruptcy, Fitch's prospective IDR for HAYZ could
be 'CC'. The Rating Watch Negative is also based on Fitch's concerns
about the credit facility covenants which return to their original terms
on April 30, 2010.
HAYZ was provided credit facility covenant relief prior to the close of
its fiscal year ending Jan. 31, 2009. Fitch estimates that without the
amendments HAYZ would have violated its 3.5 times (x) net leverage
covenant, which was amended to 5.5x for the period. Fitch believes this
amendment and the new covenant levels (including a 7.25x leverage level
for the third quarter ending Oct. 31, 2009) are indicators of the
significant impact the industry environment has had on HAYZ' business.
HAYZ reported 2.5x credit facility net leverage at the end of October.
Without a global auto and commercial truck market turnaround, Fitch
believes HAYZ will have to renegotiate its credit facilities again in a
year.
Fitch expects global automotive market weakness to continue through 2009
with possible modest improvement in 2010. Fitch estimates no material
rebound in commercial truck volume in North America this year especially
in the first half and commercial truck production in Western Europe to
decline significantly. These market weaknesses will pressure HAYZ's cash
flow and margins throughout the year. To adjust to the volume declines
HAYZ has reduced manufacturing costs, reduced SG&A expenses, and brought
its capital expenditures down to maintenance levels.
The ratings are supported by HAYZ's leading position in the global wheel
market, geographic and customer diversity, and significant progress in
restructuring operations. HAYZ has no significant debt maturities until
2014.
Fitch has adjusted its recovery valuation of HAYZ to reflect the more
severe market downturn. The analysis remains based on a going concern
scenario rather than liquidation. Recovery ratings on the senior secured
debt have been downgraded to 'RR3' (51%-70% recovery) from 'RR2' and the
recovery ratings on HAYZ's senior unsecured Euro notes remain 'RR6'
(0%-10% recovery).
Including the cash and marketable securities balance of $57 million,
total liquidity at the end of HAYZ's third quarter on Oct. 31, 2008 was
approximately $166 million. At quarter end, HAYZ had $16 million of
borrowing under its $125 million secured revolver. As of Oct. 31, 2008
Fitch calculates that HAYZ debt-to-LTM EBITDA remained virtually flat at
3.7x, from 3.8x at the end of its fiscal year ending Jan. 30, 2009.
Fitch's calculated debt-to-EBITDA metric is more conservative than
HAYZ's reported debt-to-LTM adjusted EBITDA figure.
HAYZ is the world's largest producer of automotive and commercial
highway steel and aluminium wheels, having operations in 13 countries
and approximately 7,500 employees. HAYZ is now a wheels-focused company
after divestures of its components segment businesses over the last
several years. In fiscal 2007, 96% of HAYZ's revenue came from global
wheel sales and 80% of HAYZ's revenue came from outside the U.S.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
SOURCE: Fitch Ratings
Fitch Ratings, New York
Nathan Spunt, +1-212-908-0202
Craig Fraser, +1-212-908-0310
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
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