Moody's downgrades Hilite International

Moody's Investors Service said it lowered Hilite International Inc.'s corporate family rating to Caa1 from B2, the senior secured bank credit facilities of its subsidiaries, Hilite Industries Inc. and Hilite Germany GmbH & Co. KG, to Caa1 from B2 and Hilite Industries' senior subordinated notes to Caa3 from Caa1. The outlook is negative.

The downgrade reflects Hilite's continued weakening EBIT margins and free cash flow as a result of the continuing difficult operating environment for automotive suppliers, the agency said. Factors influencing the company's weak performance are its high concentration of domestic original equipment manufacturer customers, which have experienced lower production volumes in 2005, and an unfavorable sales mix shift that has resulted in revenue shortfalls relative to prior expectations.

Debt metrics have shown a commensurate deterioration with EBIT to interest falling below 1x and debt to EBITDA exceeding 5x. While the company has remained cash flow generative, Moody's said that capital reinvestment has been at modest levels that may not be sustainable.

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