Tenneco Automotive Bank Loan Rated `BB' By Fitch IBCA
24 April 2000
Tenneco Automotive Bank Loan Rated `BB' By Fitch IBCA
NEW YORK--April 20, 2000--Tenneco Automotive Inc.'s (Tenneco) senior secured bank term loan is rated `BB' by Fitch IBCA. The company's senior unsecured debt rating is `BB-` and its 11 5/8% senior subordinated debentures due 2009 are rated `B+'. Approximately $1.05 billion of bank term debt is outstanding, along with $500 million of senior subordinated debt.The ratings reflect the company's strong business franchises, balances within the operations, and free cash generation. These strengths are tempered by a leveraged financial position that limits opportunities in a consolidating industry and continued weakness in the aftermarket.
Going forward, Tenneco aims to build on its strong positions in ride control and exhaust systems and modules for the original equipment and aftermarket customers, aiming to balance cash flow contributions from these channels as well as geographic markets. While supporting growth with product and capital spending, Tenneco also aims to take out costs and capital employed with EVA disciplines. This effort should benefit from a more consolidated effort in approaching both OE and aftermarket customers to capture benefits of the product life cycle. Even though its financial flexibility remains constrained, the company continues to seek small acquisitions to broaden and deepen its technical capabilities.
Over the near term, one of Tenneco's priorities will be debt reduction to strengthen its credit profile and to gain a measure of financial flexibility. At year-end 1999, total debt/EBITDA was 3.8x, and EBITDA interest coverage was 4.0x. While a strong US and European OE market outlook should support cash flows in 2000, Tenneco, as well as its competitors, continue to re-size their investments in the aftermarket. Cost savings from restructuring actions taken in the last two years should begin to flow through, and, more importantly, these actions should also release substantial working capital for debt reduction.
Bank Loan Description
Tenneco's $1.55 billion committed senior secured credit facility is composed of: a $500 million six-year revolving credit facility, which is currently undrawn; a $450 million six-year term loan; a $300 million eight-year term loan; and a $300 million 8.5-year term loan. Mandatory quarterly amortization for each term loan begins on Sept. 30, 2001. Interest margins for borrowings under the revolving credit facility and the six-year term loan may be adjusted based on Tenneco's consolidated debt-to-EBITDA ratio.
Borrowings are secured by substantially all of Tenneco's tangible and intangible US assets, the capital stock of material US subsidiaries, and up to 66% of the capital stock of first-tier foreign subsidiaries. Borrowings are also guaranteed by Tenneco's material US subsidiaries.
Financial covenants address limits on: leverage, as measured by consolidated debt/EBITDA, as well as EBITDA interest and fixed charge coverage. These requirements will tighten beginning in 2001 and 2002.
Other covenants limit additional indebtedness and liens, sale and lease back transactions, capex and dividends.
Profile
Tenneco Automotive Inc., headquartered in Lake Forest, Illinois, is a leading global producer of ride control and emissions components, modules and systems for both the OE and the aftermarket. Tenneco completed the spin off of its packaging business in late 1999.