S&P boosts Adient

S&P said it boosted Adient plc’s issuer rating to BB- from B+, its secured debt to BB+ from BB- and its unsecured debt to BB- from B. The agency revised the secured debt recovery rating to 1 from 2, indicating very high recovery (90%-100%; rounded estimate: 95%) in default and the unsecured debt recovery rating to 4 from 5, indicating average recovery (30%-50%; rounded estimate: 30%).

Concurrently, S&P removed all the ratings from CreditWatch where they were placed with positive implications on March 12. The outlook is positive.

Adient employed the proceeds from the sale of its YFAS joint venture to pay down debt, improve its credit metrics and confirm its commitment to lower leverage. In 2021, the company redeemed $800 million of senior secured notes. It recently entered a tender offer for its $600 million senior secured notes and €177 million of its €1 billion senior unsecured bond.

“The debt paydown should result in significant savings in interest expense. It demonstrates the company's commitment to focus on using cash to reduce leverage. As a result, we now expect leverage to fall toward 3x in 2022 and below 2.5x in 2023,” S&P said in a press release.

The new outlook reflects the potential for another upgrade over the next 12 months if Adient keeps debt to EBITDA below 3x and generates FOCF to debt well above 10%, the agency said.

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