Moody's downgrades Penske

Moody's Investors Service said it lowered Penske Automotive Group, Inc.'s corporate family and probability-of-default ratings to B2 from B1, $375 million senior subordinated notes due 2016 to Caa1 (LGD5, 89%) from B3 (LGD5, 89%) and $306 million convertible senior subordinated notes due 2026 to Caa1 (LGD5, 89%) from B3 (LGD5, 89%).

The outlook remains negative.

The downgrade reflects expectations that Penske's leverage will remain high for an extended period, the agency said. The issuer's debt-to-EBITDA ratio was near 6.5 times at the end of 2008.

"While the company has taken steps to address current market conditions - such as its announced expense reduction initiatives and the suspension of the dividend on its common shares - we believe that performance will remain soft and leverage will remain high for an extended period," Moody's vice president Scott Tuhy said in a statement.

The rating also reflects expectations that the company's liquidity profile will remain good for its rating with limited debt maturities until 2011, good levels of committed bank financing and minimal reliance on financing from the Detroit three original equipment manufacturers and their captive finance affiliates, the agency said.

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