Research Update: Cooper-Standard Holdings Inc. Rating Lowered To 'BB-' On Weak Profitability; Outlook Stable

Tier-1 auto supplier Cooper-Standard Holdings Inc. faces meaningfully weaker profitability prospects compared to our prior base case, and we expect the company would not sustain debt to EBITDA of less than 3x and a ratio of free operating cash flow (FOCF) to total debt of more than 15%. As a result, we are lowering the issuer credit rating to 'BB-' from 'BB'. At the same time, we are lowering our issue-level ratings on its senior secured term loan to 'BB+' from 'BBB-' with a '1' recovery rating (rounded estimate: 90%), and the rating on its unsecured notes to 'B' from 'B+' with a '6' recovery rating (rounded estimate: 0%). The stable outlook reflects our view that debt to EBITDA is

...- Tier-1 auto supplier Cooper-Standard Holdings Inc. faces meaningfully weaker profitability prospects compared to our prior base case, and we expect the company would not sustain debt to EBITDA of less than 3x and a ratio of free operating cash flow (FOCF) to total debt of more than 15%. - As a result, we are lowering the issuer credit rating to '##-' from '##'. - At the same time, we are lowering our issue-level ratings on its senior secured term loan to '##+' from '###-' with a '1' recovery rating (rounded estimate: 90%), and the rating on its unsecured notes to 'B' from 'B+' with a '6' recovery rating (rounded estimate: 0%). - The stable outlook reflects our view that debt to EBITDA is likely to stay between 3.0x-4.0x with FOCF/debt of at least 5% on a sustained basis amid volume weakness, higher commodity costs and ongoing capex requirements.....

Research Update