Fitch gives Garrett BB-, loans BB+

Fitch Ratings said it gave Garrett Motion, Inc. an expected long-term issuer default rating of BB- and expected BB+/RR2 ratings to the company’s senior secured liabilities, including the planned $700 million 2030 add-on term loan B The outlook is stable.

The ratings reflect Garrett's business profile as a niche, medium-sized auto supplier, designing and manufacturing turbochargers, a core component of engines that help reduce emissions. Fitch considers Garrett's product portfolio to be more focused than higher-rated peers, and it is more exposed to electrification transition, with over 65% of component sales derived from internal combustion engine (ICE) cars,” the agency said in a press release.

Healthy profitability and robust free cash flow help mitigate these concerns, Fitch said.

“Since emerging from bankruptcy in 2021, Garrett has significantly improved its leverage profile. All of the company's outstanding pre-emergence indebtedness under its credit facilities has been canceled and replaced with a less-intensive capital structure, which will be further simplified with the cancellation of preferred shares. Following the conversion of preferred A shares to common stock, and the issuance of the new TLB, Fitch calculates that Garrett's EBITDA net leverage will be around 3.5x, which we expect to come down to 2.5x at end-2025,” the agency added.

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