S&P: Chrysler Group debt ratings could change

Standard & Poor's said that reported possible changes in mix between the first-lien and second-lien debt in Chrysler Group LLC's proposed financing could cause the agency to revise its recovery and issue-level ratings on Chrysler's debt.

The preliminary rating on Chrysler's proposed first-lien debt is currently BB- with a 2 recovery rating, indicating 70% to 90% expected recovery in a default. The proposed rating on its second-lien debt is B- with a 6 recovery rating, indicating 0% to 10% of recovery in a default.

It was reported that the first-lien term loan will likely be decreased to $3 billion, the revolving credit facility reduced to $1.3 billion and the second-lien bond offering will be increased to $3.2 billion, S&P said.

If these reported changes become final, the recovery ratings on the first-lien debt would be rated BB with a 1 recovery rating, indicating 90% to 100% recovery. The second-lien debt rating would become B with a 5 recovery rating, indicating 10% to 30% recovery.

The reduction in first-lien debt would result in high recovery under the simulated default scenario and, as a result, leaves some residual value for the second-lien notes, S&P said.

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