Fitch Affirms Visteon's IDR at 'CCC'; Outlook Negative

Business Wire,  June 6, 2008  

Tags: Fitch, Microsoft Outlook, Visteon Corp.

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NEW YORK -- Fitch Ratings has affirmed Visteon Corporation's (Visteon) ratings as follows:

--Issuer Default Rating (IDR) at 'CCC';

--Senior secured bank facilities at 'B/RR1';

--Unsecured notes at 'CC/RR6'.

Fitch has also assigned a rating of 'CC/RR6' to Visteon's new 12.25% senior unsecured notes being issued as part of the company's recent debt exchange offer. The ratings cover approximately $2.8 billion in debt. The Rating Outlook is Negative.

Visteon's ratings are based on expectations of continued negative cash flows in 2008 that Fitch estimates are likely to persist in 2009. Revenues have remained relatively flat over the past year, aided by growth in Visteon's Halla joint-venture and foreign exchange translation, which have helped to offset continued steep declines in Ford-related revenues. Fitch expects the combination of accelerated production cuts at Ford North America and high commodity costs are likely to offset new business wins and cost reduction efforts, leading to accelerated cash drains in 2008 and further impairment to Visteon's balance sheet and liquidity position.

Liquidity currently remains adequate, with cash of approximately $1.6 billion at March 31, 2008. Fully available cash is more limited due to cash required to finance working capital swings and the fact that approximately one-third of Visteon's cash is held overseas. Cash drains and balance sheet deterioration in 2007 were limited by $207 million in asset sales and $186 million in proceeds from the restructuring escrow account established by Ford. Although Visteon's restructuring efforts have shown progress, the company remains in the middle stages of its restructuring program and will now be paying a higher proportion of the costs due to the terms of the escrow account. Liquidity and balance sheet impairment will continue into 2009, and further access to capital markets is highly uncertain. The current debt exchange will reduce the company's 2010 note maturity from $556 million to $212 million, which reflects the use of $147 million in cash in addition to the new notes. Visteon's bank facilities lack financial covenants providing the company with flexibility.

As Visteon continues to diversify away from Ford (and Ford's domestic operations in particular), revenues losses related to Ford may approach $1 billion in 2008 as previously reported by Visteon. New business will likely not be sufficient to offset this revenue decline. Visteon's Asian business, including Halla, continues to show steady business wins and steady growth. Given Visteon's product portfolio, market positions and evolving cost structure, it is uncertain whether the company's domestic backlog will translate into improved margins.

Recovery values are derived largely from Visteon's 70% ownership stake in Halla and several other unconsolidated joint-ventures in Asia. U.S. and European operations were assessed on a liquidation basis, with stressed valuations applied to the company's inventories, receivables and PP&E. The analysis reflects an expectation of full recovery for the senior secured bank facilities, but with minimal recoveries (0%-10%) expected for unsecured lenders.

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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