S&P may downgrade Continental

Standard & Poor's said the B+ long-term corporate credit rating on Continental AG remained on CreditWatch with negative implications, where it was placed in June. Its short-term rating was affirmed at B.

The agency said it views the December 2009 renegotiation of Continental's covenant headroom for its bank facilities as positive because it eliminates the immediate risk of a covenant breach.

But the headroom under the new covenant structure could prove to be tight in 2010 and beyond, the agency said.

Nevertheless, S&P said it remains concerned about the potential negative influence on Continental's credit quality from its 42% owner, the Schaeffler group.

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