Federal-Mogul Corp.'s $1B Notes Rated `BBB-` By Fitch IBCA
10 January 2000
Federal-Mogul Corp.'s $1B Notes Rated `BBB-` By Fitch IBCA
NEW YORK--Jan. 10, 2000--Federal-Mogul Corp.'s $400 million 7.375% notes due Jan. 15, 2006 and its $600 million 7.5% notes due Jan. 15, 2009 are rated `BBB-` by Fitch IBCA. The notes were issued on Jan. 14, 1999.The rating reflects the company's solid business position, well-balanced operations, strong free cash generation, and management's commitment and ability to maintain an investment grade credit profile. These strengths are tempered by the tough competitive environment in which the company operates, limited pricing flexibility, and the emergence of even more powerful competitors as the automotive components industry continues to consolidate.
Federal-Mogul demonstrates strong cash generation, and Fitch IBCA expects this to continue, underpinned by globalization and margin expansion. With these cash flows outpacing capex and other financial commitments, the company has substantial financial flexibility to use surplus cash for intelligent acquisitions or to reduce leverage. For the 12 months ended Sept. 30, 1999, which did not include the full-year contributions of acquisitions, EBITDA interest coverage was 3.94 times (x) and total debt/EBITDA was 2.94x. Management has demonstrated its ability to restore financial flexibility rapidly, and remains committed to following this financing model in the future in order to maintain credit protection measurements consistent with an investment grade rating. Fitch IBCA expects that debt/EBITDA will remain at or under 3x, and that management will approach its 45% debt/capital target even as it contemplates further acquisitions. The company took on asbestos claims exposure with T&N Ltd., but Fitch IBCA considers these claims to be manageable relative to cash generation, and the total exposure is capped by insurance coverage.
Federal-Mogul Corp., headquartered in Southfield, MI, is a global producer and distributor of a broad range of components for automobiles and light trucks, heavy-duty trucks, farm and construction vehicles and industrial products. The company's major products and systems focus on engines, sealing and braking, which it sells to OE producers as well as to replacement markets.