Moody's lifts American Tire outlook to stable

Moody's Investors Service said it revised American Tire Distributors, Inc.'s outlook to stable from negative and affirmed the company's B3 corporate family rating, Caa1 unsecured notes and SGL-2 speculative-grade liquidity rating.

The stable outlook reflects the progress the company achieved during the last year in its operating performance and credit metrics and Moody's expectations that these trends should continue, the agency said. Despite weak replacement tire demand in North America during 2006 and higher manufacturer prices for tires, American Tire was able to effectively manage its working capital investment, which facilitated free cash flow generation and debt reduction, and to grow its EBITDA.

Moody's said the B3 corporate family incorporates the strengths of the company's scale and competitive position, the relative stability of replacement tire demand, the granularity of its customer base and prospects for free cash flow generation.

The rating continues to recognize the company's aggressive financial leverage, low interest coverage, dependency on purchases from a limited number of tire manufacturers/suppliers, geographic concentration of revenues in the United States, uncertainties associated with a strategy that will likely involve future acquisitions and the characteristically low margins associated with distribution businesses, the agency said. The debt-to-EBITDA ratio was 6.5x at Dec. 31.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.