Standard & Poor’s Ratings Services said today that its ratings on Germany-based automotive supplier and tire maker Continental AG (BBB/Stable/A-2) are not affected by the company’s announced acquisition of Veyance Technologies. Continental plans to acquire Veyance for a consideration of €1.4 billion (enterprise value), which it intends to pay with existing cash and credit lines.
As of the last available public reporting (September 2013), Continental had about €1.7 billion of surplus cash and full availability under a €3.0 billion revolving credit line that matures in 2018. For 2014, we expect Continental to generate positive free operating cash flow substantially above €1.0 billion. Assuming a payment of $1.9 billion (€1.4 billion) in cash, Continental would still have enough cash to accommodate short-term maturities, and our liquidity descriptor of “strong” would remain unchanged. For 2014, our base-case assumptions suggest that Continental’s credit metrics, such as debt to EBITDA and funds from operations (FFO) to debt, should be in a range of 1.5x-1.7x and 45%-50%, respectively, including the payout of €1.4 billion for Veyance.
S&P’s Rating Actions are determined by Ratings Committee. This commentary has not been determined by Ratings Committee. The opinions expressed in this article do not represent a change to or affirmation of Ratings Services’ opinion of the creditworthiness of any entity / entities (named or inferred) or the likely direction of ratings.
