S&P Downgrades Titan Int'l (TWI) to 'B-'; Reflects Weak Credit Measures

Standard & Poor's Ratings Services said today that it has lowered its corporate credit rating on Quincy, Ill.-based Titan International Inc. to 'B-' from 'B'. The outlook is stable.

At the same time, we lowered our issue-level rating on the company's $400 million secured notes due 2020 to 'B' from 'B+'. The '2' recovery rating on the debt is unchanged, indicating our expectation for substantial (70%-90%; lower half of the range) recovery in the event of a payment default.

"The downgrade reflects Titan's weak credit measures, which have been affected by the depressed conditions in the company's agricultural and mining end markets as well as the lack of visibility on when these end markets will recover," said Standard & Poor's credit analyst Sarah Wyeth. While we expect that the company's cost-cutting efforts will help it gradually deleverage, we believe that Titan's debt-to-EBITDA metric will remain above 6.5x through 2016. We also expect that the company's liquidity will remain adequate, given its excess cash cushion, manageable maturities, and covenant-lite capital structure.

The stable outlook reflects our view that the company will restore its credit metrics to sustainable levels within 12 months and maintain adequate liquidity. The company benefits from its limited amount of near-term debt maturities, its sizable cash cushion, and its covenant-lite capital structure.

We could lower our rating on Titan if a sustained downturn in the company's end markets further erodes its operating performance while its weak cash flow generation raises liquidity concerns.

We could raise the rating if the company reverses its negative operating trends, improving its debt-to-EBITDA metric to 6x while generating moderately positive free operating cash flow and preserving adequate levels of liquidity.

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