Fitch Ratings Affs Tenneco Automotive Inc.'s Debt Ratings

    CHICAGO--April 2, 2002--Fitch Ratings has affirmed Tenneco Automotive Inc.'s (Tenneco) senior secured bank debt at 'B+' and subordinated debt at 'B-'. The Rating Outlook remains Negative.
    In a difficult environment of lower vehicle build rates in the core North American market and continuing softness in the after market segment of its global business, Tenneco experienced top line deterioration and overall margin compression in 2001. However, due to its intent focus on managing for cash with heightened working capital reduction efforts, restrained capital expenditures, restructuring efforts starting to gain traction and general cost saving and containment measures, Tenneco was able to essentially stay net free cash flow neutral. In fact, total balance sheet debt was reduced slightly while cash increased $18 million to $53 million at Dec. 31, 2001. While some nascent signs of a rebound in the general North American economy are evident with attendant implications for vehicle build rates, Tenneco remains exposed to continuing pricing pressures from its OE customers and ongoing softness in after market demand. Fitch expects that 2002 will be another challenging year with top line and margin pressures limiting much net free cash flow for any meaningful debt reduction.
    Total balance sheet debt at Dec. 31, 2001 amounted to $1.515 billion, $12 million less than versus a year ago. More significantly, Tenneco recently won approval for a reamendment of its $899 million of term bank debt and $500 million revolver with relaxed financial covenants extending through 2004. As a part of the reamendment package, the revolver facility was reduced 10% to $450 million. At Dec. 31, 2001, Tenneco had $68 million drawn under this facility and $61 million in L/C outstanding, availing $371 million in undrawn revolver capacity to augment $53 million of cash on hand for liquidity. In addition to the bank debt, a $500 million senior subordinated debt due in 2009 constitutes almost the entire debt structure. One of the three tranches of the bank term debt with $361 million in principal at year-end 2001 has about $90 million of principal amortizing annually over the next four years.
    Tenneco Automotive Inc., headquartered in Lake Forest, Illinois, is a leading global producer of ride control and emissions/exhaust components, modules and systems for both the OE and the aftermarket. About 72% of its revenues come from the OE market and 28% is derived from the aftermarket. Geographically, 53% of revenue is from North America, 38% in Europe, and 9% from the rest of the world. Major product lines on the ride control side are shock absorbers, struts, roll control systems, and on the exhaust management side are manifolds, catalytic converters, and mufflers.