(The following statement was released by the rating agency)
July 30 - Standard & Poor'
s Ratings Services' recovery ratings on the debt of Europe's speculative-grade automakers will remain stable in 2012, despite the challenges of a mild recession in Europe. According to a report titled 'Unsecured Capital Structures And Strong Brands Support Recovery Ratings On European Automakers' Debt In 2012,' even if the slight decline in sales volumes that these automakers are currently reporting were to lead to ratings downside, we don't expect it to significantly affect the recovery ratings on their debt.
We base our view on three factors. First, the industry's fairly asset-intensive nature and the automakers' strong brands support meaningful valuations at default. What's more, the automakers in our portfolio have extensive tangible asset bases, and we would therefore expect losses to be less severe in the event of liquidation than in some other industries.
Second, we anticipate that speculative-grade automakers will continue to tap the capital markets to the greatest extent possible in 2012, primarily to refinance existing debt rather than for investment purposes. As a consequence, these automakers are unlikely to make significant changes to their capital structures.
Finally, we already factor an economic downturn into the default scenarios that we model for our publicly rated speculative-grade automakers. We therefore believe that recovery prospects should remain relatively stable in the auto sector through 2012, at average (30%-50%) or meaningful (50%-70%) levels. These recovery levels translate into recovery ratings of '4' and '3', respectively.
We maintain recovery ratings on the majority of speculative-grade rated automakers in Europe (that is, those with long-term issuer ratings of 'BB+' or below). Last year, we assigned recovery ratings to the debt of Jaguar Land Rover PLC (BB-/Positive/--) and Aston Martin Holdings (UK) Ltd. (B+/Negative/--), reflecting a general trend for speculative-grade companies to access the bond markets in response to a scarcity of funding from banks.
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