S&P cuts J.L. French Automotive ratings

Standard & Poor's lowered its corporate credit rating on Sheboygan, Wis.-based J.L. French Automotive Castings Inc. to B- from B and placed it and other ratings of the company on CreditWatch with negative implications.

The rating action followed lower-than-expected revenue and EBITDA and negative free cash flow during the third quarter. The company's two largest customers, Ford Motor Co. and General Motors Corp., accounted for 86% of J.L. French's sales in 2002. Ford's production has declined by 17% year-to-date in 2003, affecting financial performance.

S&P had expected total debt to EBITDA to average 4.5-5x; however, weaker earnings increased the leverage ratio to about 6.5x as of Sept. 30. The weaker-than-expected performance will result in tight covenant compliance during the fourth quarter.

In addition, weaker earnings in the third quarter have resulted in limited liquidity. Liquidity (revolving credit facility availability and cash on hand) fell from $34 million on June 30 to $23 million on Sept. 30 and could decline further after a significant near-term interest payment. Challenging market conditions are expected to continue in the near term and may prevent the company from reducing debt leverage.

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