S&P downgrades Adient

S&P said it downgraded the issuer credit rating on Adient plc to B+ from BB-.

The outlook is negative.

The agency also said it lowered the rating on the company's senior secured debt to BB from BB+ and the issue-level rating on its senior unsecured debt to B from B+.

The negative outlook reflects the potential of an additional downgrade if the company is unable to fix its operational challenges and generate positive free operating cash flow over the next 12 months.

The downgrade reflects meaningful headwinds facing the company on several fronts that have adversely affected its profitability, including operational missteps stemming from the increased volume and complexity of launches, rising input costs in commodities and freight and challenging customer pricing, S&P said.

Adient has not provided guidance for fiscal 2019, the agency noted, adding the company is expected to rectify these operational inefficiencies throughout 2019.

The company has indicated that it is looking to reduce or eliminate its covenant exposure, work with joint-venture partners to unlock more cash value and strengthen its balance sheet by selling assets, S&P said.

Given Adient's decision to increase its financial flexibility and its lack of guidance regarding fiscal 2019, the agency said the company's debt-to-EBITDA ratio will be higher than 4x in 2019.

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