Credit agency reduces Delphi rating to junk

ap ^ | 12-22-04 | SIMONA COVEL

[Dan from Michigan]

Credit agency reduces Delphi rating to junk
12/22/2004, 7:52 a.m. ET
By SIMONA COVEL
The Associated Press

NEW YORK (AP) — Standard & Poor's cut its corporate credit rating on Delphi Corp. to double-B-plus from triple-B-minus, bringing the world's largest auto supplier into the junk category.

The Troy, Mich.-based auto supplier's short-term corporate credit rating was slashed to single-B from A-3. The outlook is stable.

In a statement Tuesday, S&P analysts noted that Delphi's business profile is below average due to the company's sensitivity to adverse developments at General Motors Corp., Delphi's largest customer, which accounts for 55 percent of its sales.

GM is losing market share in the United States and carries the immense burden of underfunded pension obligations. While S&P noted that there is no direct link between the two companies' ratings, Delphi's ratings still incorporate the health and prospects of GM, in addition to Delphi's balance sheet strength and competitive position, the S&P statement said. Delphi, too, suffers from underfunded employee benefit obligations.

Last week, Moody's Investors Service placed its Baa2 long-term and Prime-2 short-term rating on Delphi on review for a possible downgrade. It would take a two-notch cut, however, for Moody's to also knock Delphi into the junk universe.

Delphi has about $3.9 billion in total debt, according to S&P. Last week, the company said in a Securities and Exchange Commission filing that it may face increased borrowing costs as a result of the rating actions. Delphi has $500 million in bonds due in 2006.

A Delphi representative didn't immediately return a call requesting comment.

[Dan from Michigan]

Not good for the auto industry.

[Moleman]

Thanks for the post. I recently left Delphi, now may be a tuff time to win what business they still have left.