S&P: Metaldyne remains on developing watch

Standard & Poor's said its B corporate credit rating and other ratings on Metaldyne Corp. remain on CreditWatch with developing implications following the recent announcement of lower production levels by important customer DaimlerChrysler AG unit Chrysler.

Previously, Metaldyne agreed to be acquired by unrated Asahi Tec Corp., the agency added.

The agency noted it will review the terms of the transaction to assess the impact on Metaldyne's credit quality, focusing on the structure of the transaction, the extent and nature of the intercompany relationships between Metaldyne and Asahi Tec and the planned make-up of Metaldyne's capital structure after the closing of the transaction.

S&P said that the ratings could be raised if it appears that Metaldyne's liquidity and cash flow protection will significantly strengthen, reducing its financial risk, adding that, on the other hand, the ratings could be affirmed if the company achieves only modest improvements in its financial risk profile, while still facing the intense challenges of the automotive supply industry.

The ratings could be lowered if the transaction is not completed as planned, leaving Metaldyne with a very heavy debt burden amid difficult market conditions, including sharply lower production levels at important customers Ford Motor Co. and Chrysler, the agency added.

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