Research Update: Scania AB Outlook Revised To Negative On TRATON's Agreement To Take Full Ownership Of Navistar; 'BBB' Rating Affirmed

Scania's parent, TRATON SE, recently reached an agreement in principle to acquire the 83.2% of U.S. truck maker Navistar it does not own for about €3.1 billion. We continue to believe Scania is comparatively stronger than TRATON on a stand-alone basis, with superior industrial business adjusted EBITDA margins expected at about 8% in 2020 from about 13.5% in 2019, and a likely continued net cash position at the industrial business for the following two years. At the same time, we see Scania as pivotal for TRATON's strategy to gradually integrate the brands it manages, which caps our rating on Scania with that on TRATON (currently BBB/Negative/--). We are therefore affirming the 'BBB/A-2' long- and short-term issuer credit ratings, 'K-2' short-term

...- Scania's parent, TRATON SE, recently reached an agreement in principle to acquire the 83.2% of U.S. truck maker Navistar it does not own for about 3.1 billion. - We continue to believe Scania is comparatively stronger than TRATON on a stand-alone basis, with superior industrial business adjusted EBITDA margins expected at about 8% in 2020 from about 13.5% in 2019, and a likely continued net cash position at the industrial business for the following two years. - At the same time, we see Scania as pivotal for TRATON's strategy to gradually integrate the brands it manages, which caps our rating on Scania with that on TRATON (currently ###/Negative/--). - We are therefore affirming the '###/A-2' long- and short-term issuer credit ratings, 'K-2' short-term Nordic regional scale rating, and 'zaAAA/zaA-1+' South Africa national scale ratings on Scania. - The negative outlook reflects that on TRATON, for which Scania is a core subsidiary, and the potential for a one-notch downgrade should TRATON's...

Research Update