The U.S. based financial service company, Standard & Poor (S&P) Rating Services has assigned a “BBB-’’ issue level rating on Tenneco Inc.’s (TEN - Analyst Report) proposed $700 million of revolving credit facility and $250 million of term loan A. The “BBB-’’ rating reflects lowest investment grade by market participants.
Tenneco intends to refinance the existing credit facilities and redeem $250 million secured notes at an interest rate of 8.125% maturing in 2015. The company has decided to use the proceeds of the $700 million revolving credit facility to finance the transactions apart from funding related expenses and general corporate purposes. On the other hand, the company has decided to utilize the proceeds of term loan A to call and pay off the company's $250 million senior notes.
In the fourth quarter of 2011, Tenneco’s profit surged 68% year over year to 53 cents per share from 31 cents per share in the year-ago quarter, missing the Zacks Consensus Estimate by 5 cents per share. Total revenue upped 13% year over year to $1.8 billion. Excluding substrate sales and currency impact, revenues increased 13% year over year to $1.4 billion.
The debt to capital ratio was 96.46% at the end of 2011, flat as compared to $97.2% at the end of 2010. Cash and cash equivalents decreased 9% to $214 million as of December 31, 2011 from $233 million as of December 31, 2010.
Pricing pressure from original equipment manufacturers (OEM) remains a problem for Tenneco. It also faces weak demand for aftermarket parts compared to original equipments (OE). The aftermarket has experienced longer replacement cycles due to the improved quality of OE parts and increases in the average useful life of automotive parts.
Currently the shares of Tenneco retain a Zacks #3 Rank, which implies a short-term Hold rating. It competes with the companies including Meritor, Inc. (MTOR - Analyst Report) and Wescast Industries Inc.