S&P: GKN Holdings notes BB+

Standard & Poor's said it assigned a BB+ rating to the proposed unsecured euro medium-term note issue announced by GKN Holdings plc.

The recovery rating is 4.

The agency also affirmed its BB+ issue rating and 4 recovery rating on the existing £350 million 6¾% notes due Oct. 28, 2019.

The notes will part-finance the acquisition of Volvo Aero, which is the aero engine division of AB Volvo, S&P said.

The existing £350 million 6¾% notes due Oct. 28, 2019 and the proposed notes, both issued by GKN, are rated BB+, the same level as the long-term corporate credit rating. The recovery rating on these notes is 4, indicating 30% to 50% expected recovery in a default.

The ratings assume the issuance of about €500 million or currency equivalent of this amount.

The recovery and issue ratings are supported by an assessment of GKN as a going concern and the moderate level of prior-ranking debt at the point of default, the agency said.

However, S&P said it considers that the ratings are constrained at the 4 level by GKN's high level of unfunded pension liabilities, the notes' relatively weak security and guarantee package and GKN's exposure to multiple jurisdictions, which could reduce funds available to creditors in a default.

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