Moody's affirms Duerr

Moody's Investors Service said it affirmed Duerr AG's B2 corporate family rating and its Caa1 senior subordinated notes.

The outlook on the ratings remains negative, reflecting Moody's view that, although the company has achieved some recent progress - notably in reducing debt, reducing cost and increasing efficiency through its "Focus" restructuring program - its cash generation has not improved to a level commensurate with its current rating category.

The agency said the affirmation recognize Duerr's good market leadership positions, the improvement in the company's financial profile thanks to the disposal of its MPT division and a capital increase resulting in a reduction in financial debt, Moody's expectation that Duerr's earnings prospects and cash generation ability will strengthen between now and 2007 as a result of the successful execution of the restructuring program and a solid order flow and further strengthening of revenues from services.

However, Moody's noted that Duerr continues to face significant challenges such as the need to turn around its operating performance and cash generation on a sustained basis in order to ensure a further reduction in financial leverage, the need to further strengthen its liquidity position in view of volatile working capital patterns and the reduced prepayment levels from original equipment manufacturers, execution risk related to the restructuring program and the ongoing difficult market environment in the automotive industry.

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