Fitch rates Meritor loan BB+

Fitch Ratings said it assigned a rating of BB+ with recovery rating of RR1 to Meritor, Inc.'s $175 million five-year secured term loan.

The company has a long-term issuer default rating of BB- and its outlook is positive.

The proceeds will primarily be used to support Meritor's acquisition of AxleTech from the Carlyle Group for $175 million, Fitch said.

Meritor said it expects the acquisition to close in the company's third fiscal quarter that will end in September 2019, the agency said.

The ratings are driven by expectations that the significant improvement seen in the company's credit profile over the past several years can be sustained going forward, Fitch said.

Despite the improvements to Meritor's operational performance and credit profile, the agency said.

Fitch said it continues to have several significant rating concerns. Chief among these remains the extreme cyclicality of the global commercial truck and off-highway vehicle markets, the agency said.

These heavy shifts in demand heighten the importance of Meritor maintaining relatively conservative mid-cycle credit metrics, Fitch said.

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