Moody's rates Meritor notes B3

Moody's Investors Service said it assigned a B3 (LGD4, 61%) rating to Meritor, Inc.'s $250 million offering of senior notes and affirmed its corporate family rating at B2, probability of default rating at B2-PD, senior secured debt at Ba2, senior unsecured debt at B3 and speculative grade liquidity rating at SGL-3. The outlook is stable.

The note proceeds will be used to fund a tender offer for the company's $250 million of 8 1/8% notes due 2015 and to repay other debt.

The agency said Meritor's B2 corporate family rating reflects the likelihood that steeply falling demand in the North American truck sector, combined with a slowdown in European and Chinese markets, will stress the company's credit metrics during the near term.

However, Moody's said Meritor's strategy anticipates that ongoing restructuring initiatives will moderate the impact of the downturn and that its sound liquidity position will provide ample financial flexibility until demand begins to recover during late 2013. The rating is also supported by Meritor's leading positions in its key markets and the company's broad geographic footprint, the agency added.

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