Fitch might lower GKN

Fitch Ratings said it placed GKN Holdings plc's BBB- long-term issuer default rating and F3 short-term issuer default rating on rating watch negative.

The agency also placed the issuer default rating of GKN's UK-based subsidiary, GKN Aerospace Services Ltd., on negative watch. GKN Aerospace’s rating is based on the application of Fitch's parent and subsidiary linkage criteria, using a top-down approach which leads its rating being one notch below that of its parent.

“The RWN follows GKN's announcement that it plans to shed and merge its automotive supply driveline division, the company's largest, which represented almost half of group revenue in 2017, with U.S.-based automotive supplier Dana Inc.,” Fitch said in a news release.

“If the merger is completed as planned, and the company also achieves its objective of divesting the Powder Metallurgy division, its credit profile is likely to change materially and may no longer be reflective of a BBB- rated manufacturing company.

“Fitch expects to resolve the RWN over the coming six months as progress regarding the company's asset divestment actions becomes more certain and the agency is better able to establish the relative strengths of the remaining business as well as the capital structure following the completion of the various cash deployment measures announced by management.”

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