Terex (TEX) Gets Whacked On Credit Concerns, But One Firm Sees Opportunity

Shares of Terex Corp. (NYSE: TEX) are under pressure today after the company's credit rating was lowered at Moody's and the company announced it is seeking approximately $600 million in new financing. The stock is down 12% currently.

In its downgrade of Terex, Moody's warned that the severe cyclical downturn across its business segments is yielding weak credit metrics and could affect the company's ability to comply with financial covenants.

In response to the credit uncertaintanty, Terex announced plans to raise money through a sale of $300 million in senior notes, $150 million in senior subordinated convertible notes and 11 million shares of Terex common stock. Terex also announced an agreement on an amendment to its bank credit facility.

While the stock is taking a pounding today, an analyst at KeyBanc is more constructive on the name. The analyst said the capital raise removes covenant uncertainties. The firm expects TEX to use some of the proceeds to pay down a portion of its senior bank term loan and said the company could improve its cash balance by around $440 million-$445 million.

KeyBanc said the actions could effectively "fix" TEX's debt covenant issues in the near term, although they warn TEX will likely report negative GAAP EPS in 2009 and less than $1.00/sh in 2010. That said, the firm said TEX is a cash flow story and they expects solid free-cash-flow generation in the 2nd half. The firm is maintaining their Buy rating and $18 price target, which provides 335 upside to the current price.

Real-Time Market Moving News Two-Weeks FREE http://www.streetinsider.com/premium_content.php

You May Also Be Interested In

• RBC Capital Upgrades CAE Inc. (CAE:CN) (CAE) to Outperform
• Brinker Int'l (EAT) PT Raised to $275 at KeyBanc
• Cisco (CSCO) PT Raised to $135 at KeyBanc