Moody’s assigns Baa3 to Lear notes

Moody's Investors Service said it assigned a Baa3 rating to Lear Corp.'s senior unsecured notes and affirmed the Baa3 ratings on its existing senior unsecured notes.

The outlook is stable.

Moody’s said the affirmation and stable outlook incorporate the company's strong competitive position as the number two supplier of automotive seating (about 77% of sales in 2016) and supplier electrical power systems (23%).

The agency said it anticipates this growth to moderate somewhat over the near-term, as Lear's largest customer grapples with dealer inventory levels in North America. However, the company's low leverage and strong interest coverage or about 1.4x and 13.1x, respectively, (inclusive of Moody's adjustments) are expected to support the assigned rating.

Lear's new notes are expected to be used to refinance the existing 4.75% senior unsecured notes due 2023. Any additional proceeds raised will be used to repay amounts outstanding under the new revolving credit facility and for general corporate purposes.

“Lear's stable rating outlook anticipates a modest decline in global automotive demand through 2018. Higher ratings over the intermediate-term will be limited by slowing global automotive demand, and challenges around investments in technology at Lear's customers and the relative positioning of Lear's key automotive peers,” the agency said in a news release.

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