S&P downgrades Hayes Lemmerz

Standard & Poor's said it lowered Hayes Lemmerz International Inc.'s corporate credit rating to B- from B+ and HLI Operating Co. Inc.'s senior secured first-lien debt rating to B- from B+ and senior secured second-lien debt and senior unsecured debt ratings to CCC from B-. The ratings were also removed from CreditWatch with negative implications, where they were placed March 23. The outlook is negative.

Hayes Lemmerz has total debt of about $800 million, underfunded employee benefit obligations of $400 million and total debt to EBITDA of about 4.3x

S&P said it downgraded the company's ratings because of the poor near-term earnings and cash-flow prospects for Hayes Lemmerz amid challenging conditions in the automotive industry. For its fiscal year ended Jan. 31, the company reported adjusted EBITDA of $185 million, a 17% decline from the previous year's level, and cash-flow generation was negative.

Industry conditions for automotive suppliers have been tough because of higher raw-material costs, customer market-share shifts, product-mix changes and pricing pressure, the agency said. In addition, liquidity has become more constrained for these companies as their credit ratings have declined.

Hayes has announced various restructuring and austerity measures recently, including the closing of a U.S. aluminum wheel plant, the consolidation of several business units and the reduction of certain employees' compensation. S&P said the cost-cutting actions are expected to save the company $35 million annually.

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