S&P Raises Outlook on Navistar (NAV) to Positive; Notes Improved Operating Performance

Standard & Poor's Ratings Services today said it revised its rating outlook on Navistar International Corp. (NYSE: NAV) to positive from developing. In addition, we affirmed all our ratings on the company, including our 'CCC+' corporate credit rating.

"The positive outlook reflects the incremental improvements Navistar has demonstrated in profitability and operating results over the last few quarters," said Standard & Poor's credit analyst Robyn Shapiro.

Operating performance has benefitted from favorable end-market conditions along with reduced costs. The company has had reduced warranty spending and expense, and has improved material, manufacturing, and structural costs.

The positive rating outlook reflects our view that Navistar's incremental improvements in profitability and operating performance will likely continue this year.

There is at least a one-in-three chance we will raise the ratings in the next 12 months if the company demonstrates that it has recaptured the market share it needs for viability; maintains profitability and starts to generate free cash flow; has adequate liquidity, in our view; and makes meaningful progress in reducing its debt burden and improving its credit metrics. Although the company's progress has been slow in winning back share with its revamped product line, there are some bright spots, including improved orders in the first quarter of the company's fiscal year.

We could lower our rating at any point if Navistar's liquidity deteriorates more rapidly than we anticipate. For example, this could occur as a result of a serious falloff in sales, a new quality problem, or loss of trade credit.

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