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Moody's downgrades Mark IV
Moody's Investors Service said it lowered Mark IV Industries, Inc.'s corporate family and probability-of-default ratings to B2 from B1, lowered the guaranteed second-lien senior secured term loan at Dayco Products LLC to B3 from B2 and affirmed the guaranteed senior secured credit facility at Ba3.
The outlook remains negative.
The agency said the ratings reflect worsening credit protection measures resulting from declining margins in several of the company's businesses as well as increased debt levels. Performance in Mark IV's electronic toll collections business has been weaker than expected because of delayed shipments to government agencies, and its automotive original equipment manufacturing segment has suffered from lower production volumes, pricing concessions and rising raw material costs. For the last 12 months ended Aug. 31, debt to EBITDA rose to 6.2x.
The negative outlook continues to reflect Moody's belief that challenging conditions in the North American automotive industry, including lowered production levels and continued pricing pressures, will persist in the near term. Mark IV derives 25% of its revenues from North American automotive original equipment manufacturers. Additionally, the heavy duty truck segment, one of Mark IV's higher margin businesses, is expected to face an industry-wide downturn in 2007 as new emission standards take effect.
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