Research Update: German Truck Manufacturer TRATON Outlook Revised To Negative On Plans To Takeover Navistar; 'BBB' Ratings Affirmed

TRATON has agreed in principle to acquire the remaining 83.2% of U.S. truck maker Navistar's share capital that it does not yet own for about €3.1 billion or $44.50 per share. If the deal closes, it will significantly impair TRATON's already strained financial performance, which is under pressure from weaker revenue and cash flow in 2020 related to the COVID-19 pandemic, as well as a recently announced comprehensive realignment plan at its subsidiary MAN. Despite our expectation of weaker credit metrics on a stand-alone basis, the rating on TRATON remains supported by its status as a highly strategic subsidiary of Volkswagen AG (VW; BBB+/Negative/A-2). We are therefore revising our outlook on TRATON to negative from stable, and affirming our 'BBB'

...- TRATON has agreed in principle to acquire the remaining 83.2% of U.S. truck maker Navistar's share capital that it does not yet own for about 3.1 billion or $44.50 per share. - If the deal closes, it will significantly impair TRATON's already strained financial performance, which is under pressure from weaker revenue and cash flow in 2020 related to the COVID-19 pandemic, as well as a recently announced comprehensive realignment plan at its subsidiary MAN. - Despite our expectation of weaker credit metrics on a stand-alone basis, the rating on TRATON remains supported by its status as a highly strategic subsidiary of Volkswagen AG (VW; ###+/Negative/A-2). - We are therefore revising our outlook on TRATON to negative from stable, and affirming our '###' long-term issuer credit rating. - The negative outlook reflects the risk that we could lower our rating on TRATON by one notch if we revised downward our assessment of its stand-alone credit profile (SACP) below '###', and at the same time...

Research Update