Research Update: German Truck Manufacturer TRATON SE Affirmed At 'BBB' Despite Weaker Margin Prospects In 2022; Outlook Stable

We anticipate that TRATON's deleveraging will be somewhat slower than we expected due to weaker top-line and margin prospects in 2022, so we forecast its S&P Global Ratings-adjusted funds from operations (FFO) to debt at 15%-20% rather than about 30% in 2022, compared with 12.3% in 2021. We expect further improvement in 2023 since the company will likely continue actively working to improve its capital structure, but its credit metrics are likely to remain below those in our previous base case. Nevertheless, we consider TRATON a highly strategic subsidiary of Volkswagen AG (VW; BBB+/Stable/A-2), which has a stake of close to 90%, owing to its continued strong operational and financial ties with its parent; as such our rating is primarily

...- We anticipate that TRATON's deleveraging will be somewhat slower than we expected due to weaker top-line and margin prospects in 2022, so we forecast its S&P Global Ratings-adjusted funds from operations (FFO) to debt at 15%-20% rather than about 30% in 2022, compared with 12.3% in 2021. - We expect further improvement in 2023 since the company will likely continue actively working to improve its capital structure, but its credit metrics are likely to remain below those in our previous base case. - Nevertheless, we consider TRATON a highly strategic subsidiary of Volkswagen AG (VW; ###+/Stable/A-2), which has a stake of close to 90%, owing to its continued strong operational and financial ties with its parent; as such our rating is primarily based on VW's likely support for TRATON. - We have therefore affirmed our '###' long-term rating on TRATON. - The stable outlook mirrors that on VW, as long as VW owns more than 75% of TRATON....

Research Update