Fitch Downgrades Navistar (NAV) IDR Rating to B-, Outlook Negative
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Fitch downgraded the Issuer Default Ratings (IDR) for Navistar International Corporation (NYSE: NAV) and Navistar Financial Corporation (NFC) to 'B-' from 'B+'. NAV's senior unsecured debt is downgraded to 'CCC' from 'BB-', and NFC's senior secured bank credit facilities are downgraded to 'CCC' from 'BB-'. Fitch has assigned an expected rating of 'BB-' to Navistar, Inc.'s planned senior secured term loan facility of up to $1 billion announced Aug. 2, 2012. NAV will guarantee the facility. NAV's senior subordinated convertible debt is downgraded to 'CC' from 'B-'. The rating Outlook is Negative.
The rating downgrades for NAV and NFC consider the negative impact of recent developments including already weak operating results in 2012 that are likely to be worse than previously expected by Fitch. Results will continue to be pressured by costs to incorporate Cummins emissions technology and engines in NAV products and slower growth in demand for trucks in North America and other regions related to economic concerns. In addition, NAV's market share in the near term is subject to its reliance on non-conformance penalties (NCP) and emissions credits to sell trucks during the transition to NAV's revised engine strategy, even while discussions continue with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB). NFC's performance has not changed materially compared to Fitch's expectations, but its financial profile is likely to be affected over the long term by lower than expected volumes at NAV and NFC's strong linkage to its manufacturing parent.
The rating downgrades for NAV and NFC consider the negative impact of recent developments including already weak operating results in 2012 that are likely to be worse than previously expected by Fitch. Results will continue to be pressured by costs to incorporate Cummins emissions technology and engines in NAV products and slower growth in demand for trucks in North America and other regions related to economic concerns. In addition, NAV's market share in the near term is subject to its reliance on non-conformance penalties (NCP) and emissions credits to sell trucks during the transition to NAV's revised engine strategy, even while discussions continue with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB). NFC's performance has not changed materially compared to Fitch's expectations, but its financial profile is likely to be affected over the long term by lower than expected volumes at NAV and NFC's strong linkage to its manufacturing parent.
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