Fitch Downgrades Navistar (NAV) IDR Rating to B+, Outlook Negative

Fitch Ratings has downgraded and removed from Rating Watch Negative the long-term IDR for Navistar International Corporation (NYSE: NAV) and Navistar Financial Corporation (NFC) to 'B+' from 'BB-'. Additionally, Fitch has downgraded NAV's senior subordinated convertible debt to 'B-' from 'B'. Fitch has also affirmed NAV's and NFC's senior unsecured debt at 'BB-'. The Rating Outlook is Negative.

The downgrade reflects increased concerns about NAV's free cash flow and liquidity which Fitch expects will be lower than originally anticipated in the near to medium term. This is due to the cost of implementing a change to NAV's engine strategy announced on July 6, 2012. Manufacturing debt/EBITDA increased materially in the first half of 2012, to slightly above 4 times (x) at April 30, 2012, from 2.4x at Oct. 31, 2011. Debt/EBITDA could remain elevated compared to recent levels.

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