[ET Net News Agency, 9 April 2020] S&P Global Ratings today said it has placed its
'BBB-' long-term issuer credit rating on Nexteer Automotive Group Ltd. (01316) and 'BBB-'
long-term issue rating on its senior unsecured notes on CreditWatch with negative
implications because it expects the fallout of COVID-19 will significantly strain the
company's financial metrics in 2020.
This comes after a difficult 2019 mainly due to the General Motors-United Auto Workers
strike and soft auto sales in China.
Nexteer's China operations are only slowly ramping up given still weak domestic demand
and export delays. And the suspension of production at the overseas plants of both Nexteer
and most of its auto original equipment manufacturer (OEM) customers since mid-March will
severely hit this U.S.-reliant auto supplier.
As such, the credit rating agency estimated Nexteer's revenue might fall by close to 20%
in 2020. The company's adjusted EBITDA margin will also weaken further after a contraction
in 2019, as it contends with lower volume, high fixed cost base, a difficult pricing
environment, and additional spending to manage the supply chain.
On the other hand, S&P believes Nexteer's net cash position provides satisfactory
liquidity cushion and should help the company withstand near-term cash burn without
additional borrowings. In a stress scenario where the plant shutdown prolongs beyond the
third quarter of 2020, S&P believes Nexteer could leverage on the financial resources of
its Chinese state-owned parent, AVIC Group, for additional liquidity sources. (KL)