Fitch revises Meritor rating to positive, forward pe around 5
Fitch Ratings has affirmed the 'B' Issuer Default Rating (IDR) and the various issue ratings of Meritor, Inc. (MTOR) and revised the company's Rating Outlook to Positive from Stable. A full list of the rating actions taken on MTOR is included at the end of this release. MTOR's ratings apply to a $441 million secured revolving credit facility and $1.1 billion of senior unsecured notes. The revision of the Rating Outlook to Positive is driven by Fitch's expectations of further strengthening in MTOR's credit profile over the medium term as end market demand solidifies, margins grow on stronger pricing and improved manufacturing efficiencies, and leverage declines on higher EBITDA and lower debt. Demand in all three of the company's core segments, Commercial Truck, Industrial and Asia Pacific, and Aftermarket and Trailer, will be supported by global economic growth, although weakness in Europe will negatively affect near term demand in that region. MTOR's defense-related business is also expected to rebound over the next year, as production of the U.S. military's Family of Medium Tactical Vehicles (FMTV) program continues to ramp up with a new primary contractor. Despite the improving business conditions, however, free cash flow is likely to be weighed down by higher pension contributions and relatively heavy capital spending, although Fitch expects full-year free cash flow to be positive in fiscal 2012.