TRW Automotive not certain of ability to meet covenant requirements through 2009

By Jennifer Lanning Drey

Portland, Ore., Feb. 20 - TRW Automotive Holdings Corp. expects to remain in compliance with its debt covenants in the near term but may not be able to maintain compliance for all of 2009, Joseph S. Cantie, chief financial officer of TRW, said Friday during the company's fourth-quarter earnings conference call.

"At the appropriate time, and if necessary, we will work with our bank group to amend our facilities in a fair manner," he said.

The company has not yet initiated preliminary discussions regarding a possible amendment with its lenders, Cantie said during the question-and-answer portion of the call.

"We'll continue to monitor the economic, credit and automotive production environment and adjust our capital structure accordingly," he said.

TRW's financial performance continues to reflect challenges facing the global economy and automotive industry, namely a steep decline in global production.

The company posted fourth-quarter sales of $2.8 billion, representing a 27.6% decrease from the same period in 2007.

Despite efforts to contain working capital, labor and discretionary spending, TRW expects to have an outflow of free cash flow in 2009, Cantie said.

The company generated $291 million of free cash flow in 2008.

Liquidity profile

At Dec. 31, TRW had $2.92 billion of debt and $766 million of cash and marketable securities, leaving net debt of $2.16 billion. The net debt total compares favorably to net debt of $2.35 billion at the end of 2008.

The company had liquidity of more than $1.5 billion at year-end.

On Feb. 13, TRW drew additional funds under its $1.4 billion revolving credit facility to bolster its liquidity due to concerns about ongoing disruptions in the financial markets and uncertainty in the automotive industry and global economy.

During the call, TRW chief executive officer John Plant said the draw was to provide protection until the company sees the result of requests submitted by major automakers for additional government funding.

If those requests are greeted with a positive outcome, TRW's plan is to repay the funds drawn, he said.

The current total outstanding under the facility is $1.1 billion.

Expecting conditions to remain difficult in 2009, TRW will continue to focus on improving working capital, protecting cash flow and further reducing its cost base, Plant said.

TRW is an automotive parts maker based in Livonia, Mich.

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