The auto names continued to fall last week after Ford Motor Co. announced production cuts and rumors flew that it may look to form alliances with other auto companies or even take itself private. A Ford spokeswoman said the company would not comment on this speculation. Standard & Poor’s placed Ford Motor on CreditWatch with negative implications in review of the lower production schedule announced for trucks in the fourth quarter. The ratings agency said those cuts could be followed by additional cost reductions in September. Moody’s Investors Service is also reviewing the ratings for a possible downgrade.
As a result, a number of auto-related credits were also placed on CreditWatch with negative implications by S&P. These companies include: Citation Corp., Cooper-Standard Automotive, Hayes Lemmerz International, Mark IV Industries, Metaldyne Corp., Plastech Engineered Products, Visteon Corp. and Yazaki International Corp.
Plastech’s term loan “B” has slowly been dropping from the 98.813-100 context Aug. 1 to 97.875-99.063 context last Thursday, according to Markit. Citation’s term loan “B” dropped slightly from Aug. 21 when the report was released, dropping from 89-91.40 to trade at 88-90.6 last Thursday, according to Markit. A spokesman said that 40% of the company’s focus is on non-commercial automotive production.
Cooper-Standard also dropped slightly, trading at 100.375-100.719 last Monday and then dropping to 100.219-100.594 Thursday. Scott Finch, treasurer at Cooper-Standard, said it does not have any debt tied to its ratings, so “even if the ratings agencies do go ahead and downgrade the credit ratings, it will not hurt us financially.” He said Ford is a large customer but it has additional customers and therefore Ford’s announcement will not be “debilitating.”
Hayes also dropped about a point to 100.975-101.50 Thursday, according to Markit. Hayes 10 1/2% ’10 bonds also dropped from 81 last Monday to 76.75 Thursday, according to TRACE. A spokeswoman said Ford is a key customer but Hayes is not dependent upon one company and has been increasing its international business.
Another auto supplier that has been dropping lower and lower is Collins & Aikman, whose 10 3/4% ’11 bonds fell to 6 3/4 last Thursday, according to TRACE. “The most interesting thing trading is Collins & Aikman,” a portfolio manager said. "[The loans] have been quoted on either side of 50.” Its term loan “B” was trading between 49.625-51 last Thursday. It had been trading in the 82.850-84.550 context Aug. 1, according to Markit. A C&A spokesman would not comment on the trading of its debt.