S&P downgrades Global Automotive

Standard & Poor's said it lowered Global Automotive Logistics SAS's long-term corporate credit rating to B- from B+ and GAL Finance SA's €100 million subordinated notes to CCC from B-. The ratings remain on CreditWatch with negative implications, where they were placed on Aug. 1 to reflect the agency's uncertainty over the company's future performance.

The downgrade reflects the company's weak operating performance, S&P's increased concerns about weakened liquidity and uncertainty as to whether the company will not meet mandatory debt repayments in 2006 without additional support from either its banks, shareholders or other sources.

Global Automotive's profitability significantly weakened in the third quarter, with EBITDA margins declining to 2.1% for the first nine months of 2005 from 6.5% for the first nine months of 2004, due mainly to a 12% decrease in volumes from automaker Renault SA (BBB+/stable/A-2) transported by the company. Total lease-adjusted debt at Sept. 30 was about €280 million.

S&P said it believes that Global Automotive faces risk with respect to compliance with its covenants over the next quarters, having breached it three times since December 2004, owing to the reduction in EBITDA. Nevertheless, the company has been able to receive a waiver in the past and it is likely that it will continue to receive support from its banking group over the next quarters, the agency predicted.

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