Fitch Assigns Indicative 'BB+' to TRW's New Sr. Secured Term Loan

CHICAGO--Oct. 2, 20048, 2004--Fitch Ratings assigns an indicative rating of 'BB+' to the proposed new $300 million term loan. The proposed term loan will be utilized to take-out TRW Automotive Intermediate Holdings Corp.'s existing $600 million pay-in-kind seller note (the note), payable to Northrop Grumman Corp (Northrop).

As a result of this transaction, TRW will eliminate the note by utilizing the $300 million Term E facility, as well as a combination of cash on hand and funds obtained under existing liquidity arrangements. The 15-year 8% pay-in-kind note had a book value (including accrued interest) of approximately $417 million and a face value (including accrued interest) of $678 million as of the end of TRW's third quarter.

Fitch views the transaction positively; although, it will result in higher cash interest payments (the seller note currently accrues interest). The transaction also brings this debt down to the operating company from the holding company, which will dilute the asset and structural protection of the senior secured lenders under the existing structure. However, the transaction removes a potentially substantial overhang on the long-term capital structure. Fitch has previously referenced our expectation that this would occur, and this expectation has been factored into the rating. Given TRW's relatively stable operating cash flow, the new capital structure facilitates further debt paydown. While providing additional capital structure flexibility, this transaction will also resolve most of the remaining issues between Northrop and TRW. Fitch continues to anticipate that TRW's stable cash flow generation should enable it to pay down debt and progress toward management's goal of eventually achieving an investment-grade rating.

This transaction will likely result in a fourth quarter charge of approximately $115 million.