Moody's upgrades Metaldyne, rates loans B2, Ba3

Moody's Investors Service said it raised Metaldyne Corp.'s corporate family and probability-of-default ratings to B3 from Caa1, $150 million 10% guaranteed senior unsecured notes due 2013 to B3 (LGD3, 49%) from Caa2 (LGD 4, 69%) and $250 million 11% guaranteed senior subordinated notes due 2012 to Caa2 (LGD5 87%) from Caa3 (LGD 6, 92%).

The agency also assigned B2 ratings with loss-given-default assessments of LGD3 (34%) to subsidiary Metaldyne Co. LLC's $420 million guaranteed senior secured term loan and $60 million synthetic letter-of-credit facility and a Ba3 rating with a loss-given-default assessment of LGD2 (11%) to its $150 million guaranteed senior secured revolving credit facility.

These rating actions conclude the review, direction uncertain, that was updated on Oct. 16, and the outlook is negative.

The senior secured facilities will be used to refinance the company's existing senior secured debt in conjunction with the company's acquisition by Asahi Tec Corp.

The agency said the ratings reflects the lower leverage of the company afforded by the total expected equity injection of $200 million from Asahi Tec, Heartland Investors and certain other affiliates. Metaldyne will be a restricted subsidiary of Asahi Tec, will continue to function as a standalone company and will not benefit from any guarantees from Asahi Tec. However, Moody's said the new ownership should provide beneficial strategic opportunities for Metaldyne to improve sourcing, increase access to Asian original equipment manufacturers and generate additional product offerings.

While the equity infusion from Asahi Tec will provide Metaldyne with additional financial flexibility to address its operating issues, the ratings and outlook reflect the challenging industry conditions of lower Big-3 North American production, rising commodity prices and the company's continued high leverage, Moody's said. For the last 12 months ended Oct. 1, debt to EBITDA was 7.7x. Pro forma for the transaction, the ratio is expected to be 5.4x.

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