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Moody's downgrades Hayes Lemmerz
Moody's Investors Service said it lowered the ratings of HLI Operating Co., Inc. ("Hayes Lemmerz"), including the corporate family and probability-of-default ratings to Caa1 from B3, first-lien senior secured revolving credit facility and term loan B to B1 (LDG2, 20%) from Ba3 (LGD2, 23%) and second-lien term loan C to Caa1 (LGD3, 47%) from B3 (LGD4, 53%).
The senior unsecured notes were affirmed at Caa2 with a loss-given-default assessment of LGD5, but the loss-given-default rate was changed to 72% from 82%.
The outlook remains negative.
The agency said the downgrade reflects the company's continuing weak credit metrics and the potential that these measures could erode further due to lower original equipment manufacturer production levels. For the last 12 months ended Oct. 31, the debt-to-EBITDA ratio was 6x.
Hayes Lemmerz plans to sell its aluminum suspension components business in North America for about $32 million. The agency said that the sale will reduce the company's exposure to North American original equipment manufacturers, but amounts available to reduce funded debt are expected to be nominal because a significant portion of the proceeds will be used to reduce outstandings under the company's accounts receivable securitization facility.
Additionally, Hayes Lemmerz has announced that it is seeking an amendment to its senior secured credit facilities to permit the ability to exchange its senior unsecured notes for common stock of the parent holding company. Moody's said the completion of such an exchange, depending on the ultimate terms and conditions, could moderate the degree of potential erosion in the company's metrics.
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