S&P Upgrades Visteon (VC) to 'BB-'; Outlook Positive

Standard & Poor's Ratings Services said that it has upgraded Visteon Corp. (NYSE: VC) to 'BB-' from 'B+'. The outlook is positive.

At the same time, we raised our issue-level rating on the company's senior secured debt to 'BB+' from 'BB'. The '1' recovery rating is unchanged, indicating our expectation for very high recovery (90%-100%) for debtholders following a hypothetical payment default.

"We upgraded Visteon to reflect the company's sharper strategic focus, lower debt levels, and improving credit metrics," said Standard & Poor's credit analyst Lawrence Orlowski. "The sale of Visteon's Halla climate control (HVCC) segment and the company's acquisition of JCI's electronics business have transformed it into a pure play cockpit electronics company." Management can now focus its energy on competing in this space while continuing to realize synergies from Visteon's acquisitions and expanding the company's margins. Moreover, the net proceeds from the sale of Visteon's climate control business have allowed the company to reduce its debt by about $250 million. This, in turn, has improved the company's key debt-based credit metrics and lowered its overall level of financial risk.

The positive outlook on Visteon reflects that there is at least a one-in-three likelihood that we could upgrade the company over the next 12 months if we came to believe that it could sustain its key credit metrics in line with a higher financial risk profile assessment.

We could raise our ratings on Visteon if we expect that the company will achieve and sustain a FOCF-to-total debt ratio of greater than 15%. We would also need to believe that the company's debt leverage would remain below 3x on a sustained basis. At the same time, we would expect to see Visteon demonstrate a strong track record of performance, as indicated by the successful realization of its expected synergies and cost-savings and underscored by an improving competitive position in its cockpit electronics business over the next 12 months.

We could revise our outlook on Visteon to stable if we came to believe that the company could not sustainably improve its competitive position in the cockpit electronics segment. This would be reflected by a decline in the company's key credit metrics, namely the failure to sustain a debt leverage metric of less than 3x and a FOCF-to-total debt ratio of greater than 15%.

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