Research Update: Auto Supplier Garrett Motion Inc. 'B+' Rating Affirmed On Accelerated Debt Redemption; Outlook Remains Stable

Turbocharger manufacturer Garrett Motion Inc. (GMI) prepaid $211 million of its series B preferred shares in December 2021 and plans to redeem an additional $200 million in first-quarter 2022, which will help maintain its leverage at about 5x this year despite interest accruals on the preferred shares series A that we treat as debt. We anticipate that GMI will generate meaningful free operating cash flow (FOCF) of $300 million or more in 2021 and 2022 despite the ongoing supply chain crisis, reflecting higher penetration of turbochargers and the company's leading position in this niche market. However, GMI's credit metrics from 2023 will depend on the conversion of the preferred shares series A into common equity and the owners' commitment to

...- Turbocharger manufacturer Garrett Motion Inc. (GMI) prepaid $211 million of its series B preferred shares in December 2021 and plans to redeem an additional $200 million in first-quarter 2022, which will help maintain its leverage at about 5x this year despite interest accruals on the preferred shares series A that we treat as debt. - We anticipate that GMI will generate meaningful free operating cash flow (FOCF) of $300 million or more in 2021 and 2022 despite the ongoing supply chain crisis, reflecting higher penetration of turbochargers and the company's leading position in this niche market. - However, GMI's credit metrics from 2023 will depend on the conversion of the preferred shares series A into common equity and the owners' commitment to reduce leverage. - We affirmed our 'B+ long term issuer rating on GMI and our 'B+' issue rating on the company's secured loans. - The stable outlook reflects our view that the market for turbochargers will continue to expand in the near term...

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