DBRS downgrades TRW Canada Limited to R-2 (high)

TRW Canada Limited - Downgrades to R-2 (high) 

May 30,2001.4:31PM 

Kam Hon / Tim O'Brien
(416) 593-5577 x243/x286
e-mail: khon@dbrs.com <mailto:khon@dbrs.com>


Rating 		Trend 		Rating Action		Debt Rated 
R-2 (high)	Stable		Downgraded		Commercial Paper



DBRS downgrades the commercial paper rating of TRW Canada Limited, based
on the parent and guarantor, TRW Inc. ("TRW" or "the Company") to R-2
(high) from R-1 (low) with a Stable trend. The rating action reflects
the Company's continuing aggressive financial profile and its
deteriorating operating performance. The slowing economy, particularly
in the U.S., would further delay the Company's efforts to stage a
meaningful recovery.

The debt-financed acquisition of LucasVarity in February 1999 has
significantly weakened the Company's financial position. DBRS was
expecting the Company to utilize its strong internal cash flow as well
as asset disposals to reduce its leverage to a more moderate level.
Although the Company has made good progress in paying down debt with
proceeds from asset sales, leverage still remains aggressive with net
debt well in excess of 70% at the end of March 2001. Moreover,
disappointing operating results, particularly in the automotive
operations, led to further deterioration in all debt protection
measures. The slowing economy, particularly in the U.S., will likely
lead to lower production levels in the automotive sector. Renewed
efforts by the OEMs to demand price concessions from parts suppliers,
like TRW, will likely continue to pressure margins. Although the Company
has implemented restructuring programs aimed at offsetting these
negative factors, benefits from these efforts will not likely be
sufficient, and it will be a challenge for the Company to maintain its
current profitability and effect a meaningful reduction in leverage.

The rating recognizes the Company's diversity in businesses and
geographical markets. The Company's strong technological capability
gives it a competitive advantage and helps maintain the strong market
position enjoyed by most of its products. Moreover, the Company has
ample liquidity to fund its operating needs. As part of the
restructuring efforts, the Company is actively reducing its operating
asset base through stricter working capital management and outsourcing.
Longer term, benefits from cost reduction and improved capital
efficiencies bode well for the strengthening of its financial position
once the automotive market recovers.

Dominion Bond Rating Service Limited (DBRS) will publish a full report
shortly that will provide additional analytical detail on this rating
action. If you are interested in purchasing this report, please contact
us at: info@dbrs.com 

DBRS is a Toronto-based, full-service credit rating agency established
in 1976. Privately-owned and operated without affiliation to any
organization, DBRS is respected for its independent, third-party
evaluations of corporate and government issues, spanning North America,
Europe and Asia. DBRS' extensive coverage of securitizations and
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provider of comprehensive, in-depth credit analysis.   www.dbrs.com