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Fitch: American Axle notes BB-
Fitch Ratings said it assigned a rating of BB- with recovery rating of RR4 to American Axle & Manufacturing, Inc.'s proposed private placement of $1.2 billion in senior unsecured notes.
The company’s long-term issuer default rating is BB- and its outlook is stable.
American Axle & Manufacturing Holdings, Inc. (AAM) has an issuer default rating of BB-, secured revolving credit facility rating of BB+ with recovery rating of RR1, secured term loan A rating of BB+ with recovery rating of RR1, secured term loan B rating of BB+ with recovery rating of RR1 and senior unsecured notes rating of BB- with recovery rating of RR4.
The notes will be guaranteed on a senior unsecured basis by American Axle and AAM's U.S. subsidiaries that also guarantee AAM's secured credit facilities and its other senior unsecured notes, Fitch said.
The proceeds, along with proceeds from AAM's new secured credit facility and cash on hand, will be used to fund Axle’s pending acquisition of Metaldyne Performance Group Inc., the agency explained.
The recovery rating of RR4 indicates 30% to 50% expected default recovery.
Fitch said it recently downgraded the company’s ratings pending the acquisition, which is expected to close in the first half of 2017.
The acquisition will significantly enhance the customer, product and geographic diversification of Axle’s business, the agency said.
But the incremental debt needed to complete the acquisition will result in intermediate-term leverage above a level consistent with Axle's prior long-term issuer default rating of BB, Fitch said.
The increase in leverage is particularly significant, given the cyclicality of the auto industry, the agency noted.
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