Shares in the FTSE 100-listed engineering firm were down 2.8% at
The ratings agency's review for downgrade stems from the accepted takeover bid for GKN by FTSE 250-listed turnaround specialist Melrose Industries PLC, which though still subject to certain regulatory and antitrust approvals is expected to become unconditional by April 19.
The review will focus on the impact of Melrose as GKN's future shareholder, which will be dependent on the final acceptance level of the bid, the proposed refinancing of GKN's debt by Melrose, as well as the the FTSE 100-listed firm's future business profile.
In particular, the review will look at the percentage of shareholding that Melrose will hold in GKN, and the execution of the refinancing of financial debt.
Moody's did note that due to the weak positioning of the rating, an upgrade of GKN is unlikely, however it would consider an upgrade to Baa2 if there is clear visibility that GKN could improve its credit strength.
"Our review for downgrade stems from the takeover bid of Melrose, which has now been accepted by the majority of GKN's shareholders, and the related uncertainties about GKN's future shareholding structure, capital structure and business profile. GKN's rating is already weakly positioned on a standalone basis. Our review will focus on the impact of Melrose as GKN's future main shareholder, which will depend on the final acceptance level of the bid, the proposed refinancing measures of GKN's debt by Melrose, and GKN's future business profile," said Senior Credit Officer Matthias Heck.
Melrose (MRO)