S&P cuts HLI notes to B, rates loan B

Standard & Poor's said it assigned its B senior secured rating and 5 recovery rating to HLI Operating Co. Inc.'s proposed $150 million second-lien term loan.

At the same time, the rating of HLI's senior unsecured notes was lowered to B from B+ because of the increase in higher-ranking secured debt in the company's capital structure.

The BB- corporate credit rating of Hayes Lemmerz International Inc., HLI's parent, was affirmed. The outlook is negative.

Half of the proceeds from the new second-lien term loan will be used to repay existing first-lien bank debt and the remainder will be used for general corporate purposes.

Although interest expense will increase, S&P said Hayes' cash balances will also increase, enhancing the company's liquidity position during a time of intense industry challenges.

S&P said the ratings on Hayes reflect the company's below-average business profile and high financial risk.

Hayes' balance sheet is highly leveraged, with pro forma total debt to EBITDA about 3.5x and EBITDA minus capital expenditures to interest expense of about 1.2x.

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