Moody's lifts BorgWarner to SGL-3

Moody's Investors Service said it raised BorgWarner Inc.'s speculative-grade liquidity rating to SGL-3 from SGL-4 and affirmed its corporate family and probability-of-default ratings at Ba1 and senior unsecured notes at Ba1 (LGD4, 63%). Moody's does not rate the company's new convertible notes.

The outlook remains negative.

The agency said the SGL-3 rating reflects adequate liquidity over the next 12 months resulting from the issuance of approximately $374 million of convertibles. The net proceeds are estimated to be $362.3 million, and BorgWarner plans to use $25.2 million to pay the net cost of the convertible note hedge and warrant transactions associated with the transaction. The remaining proceeds will be used for general corporate purposes, including the repayment of short-term debt.

The additional liquidity provided by the offering will enhance the company's financial flexibility during the current industry trough, as industry conditions are expected to remain difficult over the near term, Moody's said.

The July 2009 maturity of the multi-currency revolving credit facility continues to heavily influence the company's liquidity profile, the agency added.

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