S&P cuts Standard Motor to B-

Standard & Poor's lowered the ratings of Standard Motor Products Inc., including the subordinated convertible notes to B- from B, based on the acquisition of the engine management division of Dana Corp. for $121 million as it significantly increased near-term leverage.

The outlook is negative.

Standard Motor's financial policies are considered aggressive and debt capacity is limited for the ratings, given heavy debt usage for the acquisition relative to cash flow generation, albeit tempered somewhat by the company's willingness to issue equity.

The financial profile remains weak, with pro forma operating lease-adjusted debt to EBITDA of about 6.3x and EBITDA interest coverage of 2.2x. S&P expects total debt to EBITDA be around 4x-5x and EBITDA interest coverage to be around 2.5x-3x for the rating.

Liquidity is adequate as the banks have agreed to extend total borrowing availability to $305 million for acquisition purposes, resulting in about $125 million in pro forma availability for general corporate purposes.

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