S&P lifts Garrett Motion

S&P said it raised its ratings on Garrett Motion Inc. and its debt to BB- from B+. The 3 recovery rating on the debt indicates an estimate of about 60% recovery (rounded estimate), up from 50%, in default.

“GMI's early repayment of $200 million of its debt alleviates our doubts about the company's financial policy. Given the large presence of private-equity firms or hedge funds in GMI's shareholder base, we had doubts about the company's willingness to balance capital allocation between creditors and shareholders. This is because such shareholders typically focus on short-term returns and high dividend payouts. The recent early repayment of $200 million of debt demonstrates the company's commitment to its net leverage target of 2x,” S&P said in a statement.

However, the agency warned, “With about 70% of its 2022 sales geared toward turbochargers used in conventional powertrains, GMI is highly exposed to the auto industry's regulatory-led transition to clean mobility.”

The outlook is stable.

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