Fitch lifts Meritor view to positive

Fitch Ratings said it affirmed Meritor, Inc.'s long-term issuer default rating at BB-.

Fitch also said it affirmed the ratings on Meritor's senior unsecured notes, including its convertible notes, at BB- with recovery rating of RR4, along with the secured revolving credit facility at BB+ with recovery rating of RR1.

The ratings apply to a $525 million secured ABL revolving credit facility and $822 million in senior unsecured notes.

Fitch also said it revised the outlook to positive from stable.

The outlook revision to positive from stable is driven by expectations that the significant improvement seen in the company's credit profile over the past several years can be sustained going forward, even as the class 8 truck market comes off its cyclical peak, the agency said.

A meaningful portion of the improvement in Meritor's credit profile was driven by the company's use of proceeds from the sale of its 50% stake in the Meritor Wabco Vehicle Control Systems joint venture to permanently reduce long-term debt in fiscal year 2018, Fitch said.

Over the past several years, Meritor has improved its operational flexibility, which has allowed it to produce consistently positive annual free cash flow despite swings in North American class 8 truck demand over that time, the agency said.

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