Fitch upgrades Allison

Fitch Ratings said it upgraded the issuer default ratings for Allison Transmission Holdings, Inc. and its Allison Transmission, Inc. subsidiary to BB from BB-.

Fitch also said it upgraded the ratings on Allison’s secured term loans and secured revolving credit facility to BB+ from BB and assigned a recovery rating of RR1.

The ratings apply to $2.4 billion in secured term loans and a $465 million secured revolving credit facility.

The outlook for both companies is stable.

The upgrades are driven by the improvement in the company’s credit profile as it has steadily reduced debt over the past several years, while producing high margins and strong free cash flow, Fitch said.

The company continues to lead the global market for fully automatic transmissions for commercial vehicles, industrial machinery and military equipment, the agency said.

Concerns continue to include the heavy cyclicality of the global commercial vehicle and industrial equipment markets, volatile raw material costs, lack of global diversification, moderately high leverage and a concentrated debt-maturity schedule, the agency said.

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