Fearing a possible default in its debt obligations in the next one
month, Standard and Poors (S&P) has lowered its rating of
the global storage batteries major Exide Technologies.
The rating agency has
downgraded Exides credit rating to double C from triple
C. Exide continues to be on the CreditWatch list of S&P.
The US-based Exide has about $1.4 billion in debt, and the failure
to meet upcoming debt service requirements will result in a
lowering of ratings to D.
The companys UK
subsidiary, Exide Technologies (formerly CMP Batteries), is Tudor
Indias parent, selling the Prestolite brand automotive
batteries. Exide is the battery supplier for the Reva Electric car
manufactured in Bangalore.
Says S&P analyst Lisa
Jenkins: "We believe that Exides liquidity has become
severely constrained and that this could prevent the company from
meeting debt-service requirements."
results and cash generation have been under pressure for the past
several years due to its onerous debt burden, intense industry
pressures, costs associated with internal restructuring activities
and legal issues. Pressures have recently intensified due to
the slowing demand in both its automotive and industrial battery
businesses. Its cash flow protection measures are currently quite
Earnings pressures, cash requirements of restructuring actions and
debt-service commitments have all combined to significantly
constrain the companys financial flexibility. The
availability under its revolving credit facility was just US $32
million on 31 December 2001, and presently it is believed to be
even more constrained. Exide was in violation of covenants under
its bank agreement as of 31 December 2001, and received a waiver
through 12 April 2002.
Exide has a bond interest
payment due on 15 April 2002. It also faces interest and
principal payments on its bank debt in the coming week.