CHICAGO--Fitch Ratings has downgraded the Issuer Default Rating (IDR) of Visteon Corporation (Visteon) to 'C' from 'CC', indicating that a default is imminent or inevitable. The ratings have been removed from Rating Watch Negative, where they were placed on Dec. 11, 2008. A full list of the rating actions is provided below. The continuing decline in global automotive production is expected to result in continued negative cash flows at Visteon for at least the next year, further draining the company's limited excess liquidity. Visteon has virtually no access to external sources of new capital, and existing sources are constricting. Visteon has a maturity of $207 million in senior unsecured notes in 2010, and Fitch expects some form of default to occur (either a coercive debt exchange or a Chapter 11 filing).
Visteon experienced a 43% reduction in fourth quarter revenues due to the accelerating decline in global automotive production and currency effects. Global sales and production trends point to little improvement through 2009. Fitch projects that Visteon will likely be unable to generate free cash flow sufficient to cover required capital expenditures and interest over the near term.
Visteon had cash of $1.2 billion at Dec. 31, 2008, but liquidity is likely to become strained in 2009 due to continued operating losses, restructuring costs, cash needed on hand to run the business, cash held in overseas or joint-venture operations, and intra-period/seasonal cash swings. Liquidity has become more strained as availability under the company's ABL and receivable securitization facilities has declined due to a decline in the value or amount of eligible collateral.
Fitch expects that similar to Delphi, Visteon could experience a substantial dismantling of its domestic operations with little or no recoveries projected for unsecured debt holders. Original equipment manufacturers are likely to quickly re-source, re-direct or repossess equipment and contracts necessary to ensure a continued supply of parts in the event that a financial restructuring is not smoothly accomplished. Given the condition of the industry, the lack of external capital, and the lack of viability of a large portion of Visteon's domestic business, there is a higher than average likelihood of a more disruptive bankruptcy process. Although Ford may be forced to commit financing to ensure continued production at key Visteon operations - through the repurchase of various assets, assisted sales, etc. - Fitch expects any support to be targeted and insufficient to finance a broader restructuring. Although the federal government task force appears to be looking at various forms of financial assistance to the auto supply base, Fitch does not expect any direct form of financial assistance to Visteon that would substantially defer Visteon's expected financial restructuring.
Fitch expects that the ABL holders will achieve full recovery (RR1) based on collateral coverage. Availability under the facility has been reduced in line with declining collateral values (receivables, inventories and certain domestic PP&E) thereby providing protection to outstanding loans. Secured term loan holders are expected to recover only 30%-50% of face values as the lack of financial covenants provided little protection for lenders during the recent past as Visteon and the industry experienced deep financial stress, a steep decline in operating performance, and a drop in asset values. A large portion of recovery values is expected to arise from overseas joint-venture holdings, although these values have also declined in line with the global automotive production downturn. Recovery values are also expected to be impacted by other non-debt, on and off-balance sheet claimants such as the PBGC and the UAW.
Fitch rates Visteon as follows:
Visteon
--ABL facility assigned 'B-/RR1';
--Senior secured term loan downgraded to 'C/RR4' from 'CC/RR4';
--Senior unsecured notes affirmed at 'C/RR6'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Visteon experienced a 43% reduction in fourth quarter revenues due to the accelerating decline in global automotive production and currency effects. Global sales and production trends point to little improvement through 2009. Fitch projects that Visteon will likely be unable to generate free cash flow sufficient to cover required capital expenditures and interest over the near term.
Visteon had cash of $1.2 billion at Dec. 31, 2008, but liquidity is likely to become strained in 2009 due to continued operating losses, restructuring costs, cash needed on hand to run the business, cash held in overseas or joint-venture operations, and intra-period/seasonal cash swings. Liquidity has become more strained as availability under the company's ABL and receivable securitization facilities has declined due to a decline in the value or amount of eligible collateral.
Fitch expects that similar to Delphi, Visteon could experience a substantial dismantling of its domestic operations with little or no recoveries projected for unsecured debt holders. Original equipment manufacturers are likely to quickly re-source, re-direct or repossess equipment and contracts necessary to ensure a continued supply of parts in the event that a financial restructuring is not smoothly accomplished. Given the condition of the industry, the lack of external capital, and the lack of viability of a large portion of Visteon's domestic business, there is a higher than average likelihood of a more disruptive bankruptcy process. Although Ford may be forced to commit financing to ensure continued production at key Visteon operations - through the repurchase of various assets, assisted sales, etc. - Fitch expects any support to be targeted and insufficient to finance a broader restructuring. Although the federal government task force appears to be looking at various forms of financial assistance to the auto supply base, Fitch does not expect any direct form of financial assistance to Visteon that would substantially defer Visteon's expected financial restructuring.
Fitch expects that the ABL holders will achieve full recovery (RR1) based on collateral coverage. Availability under the facility has been reduced in line with declining collateral values (receivables, inventories and certain domestic PP&E) thereby providing protection to outstanding loans. Secured term loan holders are expected to recover only 30%-50% of face values as the lack of financial covenants provided little protection for lenders during the recent past as Visteon and the industry experienced deep financial stress, a steep decline in operating performance, and a drop in asset values. A large portion of recovery values is expected to arise from overseas joint-venture holdings, although these values have also declined in line with the global automotive production downturn. Recovery values are also expected to be impacted by other non-debt, on and off-balance sheet claimants such as the PBGC and the UAW.
Fitch rates Visteon as follows:
Visteon
--ABL facility assigned 'B-/RR1';
--Senior secured term loan downgraded to 'C/RR4' from 'CC/RR4';
--Senior unsecured notes affirmed at 'C/RR6'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Sigma helps a various groups of partners around the world to enlarge their business and expand the full
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Money Managers: Full service trading capabilities, plus dedicated account management, client fund
administration and reporting.
White Labels: White Label Program helps fitted firms set up an online presence in the Forex industry
quickly and cost effectively.
A dedicated Partner Services team supports Sigma partners with a full range of account management services.
- Daily P&L, credits, commission allocation, etc.
- Account funding, transfers, allocations, etc.
- Customer on-boarding.
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Money Manager.
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