(The following statement was released by the rating agency)
Approximately $920 Million Of Debt Obligations Affected
NEW YORK, Nov 21 - Moody's Investors Service placed the ratings for American Axle & Manufacturing, Inc. ("American Axle") on review for possible upgrade.
The review action was taken in response to American Axle's steadily increased content per vehicle, strong operating cash flow performance, and meaningful reduction in financial leverage over the past year.
The following specific ratings were placed on review for possible upgrade:
- Ba2 rating for American Axle's $300 million of 9.75% guaranteed senior subordinated notes due March 2009;
- Ba1 rating for American Axles $618.8 million of remaining guaranteed senior secured bank credit facilities, consisting of: - $378.8 million revolving credit due October 2004; - $375 million ($240 million remaining) term loan B due April 2006;
- Ba1 senior implied rating; and
- Ba2 senior unsecured issuer rating
Moody's review will consider American Axle's near-to-intermediate term prospects for continued positive operating cash flow generation after capital expenditures, the company's intended applications of that cash flow, management's indications regarding the expected timing and terms for any planned refinancings of existing debt facilities, and management's ongoing commitment to maintaining strong credit protection metrics and liquidity. Moody's will particularly focus on American Axle's prospects for progressively reducing its approximately 81% customer concentration with General Motors, broadening its customer base to include meaningful business with transplants, extending its product base to include more high margin and technology-oriented products applicable to a broader range of vehicle categories, and expanding its geographic reach.
Other key areas of Moody's review will include the likelihood of future margin compression due to more insistent OEM demands for significant supplier price-downs, the company's cost efficiency, and the effectiveness of the company's large investments in research and development. Moody's will additionally evaluate the potential for actions that American Axle's management and board of directors could implement which could offset improvements to the company's operations and capital structure that have already been achieved, such as a large debt-financed acquisition or the announcement of a major stock buyback or dividend program.
Moody's expects to conclude its review by mid-December.
American Axle, headquartered in Detroit, Michigan, is one of the largest independent Tier I suppliers of driveline components in North America and is a worldwide leader in the manufacture; engineering; validation; and design of driveline systems for trucks; SUV's and rear-wheel-drive passenger cars. The company is a principal supplier of driveline components to GM, from which American Axle's business was spun out in a leveraged buyout in 1994. American Axle's annual revenue run rate currently exceeds $3.5 billion.