Research Update: German Truckmaker TRATON SE 'BBB' Rating Affirmed On Parent Support; Outlook Negative; Unsecured Debt Rated 'BBB-'

German truck manufacturer TRATON SE's financial performance over 2020 was severely affected by the COVID-19 pandemic. The group's top line under its industrial business decreased 16% to €22.2 billion, resulting in an industrial business S&P Global Ratings-adjusted EBITDA of just 4.1%, down from 9.0% in 2019. S&P Global Ratings-adjusted funds from operations (FFO) to debt declined to about 14% in 2020, below our expectation of about 20%. For 2021 and 2022, we anticipate improved demand in the group's key markets that should support a return of margins and increasing prospects for free cash generation above pre-pandemic levels from 2022. At the same time, the expected closing of the Navistar takeover during summer 2021 will meaningfully increase TRATON's adjusted debt to

...- German truck manufacturer TRATON SE's financial performance over 2020 was severely affected by the COVID-19 pandemic. The group's top line under its industrial business decreased 16% to 22.2 billion, resulting in an industrial business S&P Global Ratings-adjusted EBITDA of just 4.1%, down from 9.0% in 2019. S&P Global Ratings-adjusted funds from operations (FFO) to debt declined to about 14% in 2020, below our expectation of about 20%. - For 2021 and 2022, we anticipate improved demand in the group's key markets that should support a return of margins and increasing prospects for free cash generation above pre-pandemic levels from 2022. At the same time, the expected closing of the Navistar takeover during summer 2021 will meaningfully increase TRATON's adjusted debt to more than 8 billion by end-2021, compared with about 3 billion at end-2020. - Despite our expectation of weaker credit metrics on a stand-alone basis, TRATON's status as a highly strategic subsidiary of Volkswagen AG (VW;...

Research Update