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Moody's reviews Aston Martin's ratings for downgrade

Agency says approximately £304mn of debt affected

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Ratings agency Moody's has placed the B3 corporate family rating (CFR) and the B3 probability of default rating (PDR) of Aston Martin as well as the B3 rating of the senior secured notes issued by Aston Martin Capital Limited, Jersey, under review for downgrade.

Falk Frey, a Frankfurt-based analyst at Moody’s, said the review was prompted by a significant deterioration in the luxury sportscar manufacturer's liquidity profile as of September-end this year, caused by a much weaker cash generation and operating performance in the third quarter than anticipated by the company and compared to Moody's expectations.

"A high negative free cash flow in the third quarter of 2012 has materially reduced Aston Martin's cash availability prior to the upcoming interest payment of £14 million due in January 2013", Frey added.

The agency understands that Aston Martin is in an advanced stage to secure a capital increase which, were it to materialise, should have a material positive impact on Aston Martin's liquidity profile. On 29 November, Aston Martin’s Kuwaiti owners Investment Dar confirmed they were seeking a capital injection but denied that the car maker was for sale.

That same day there was feverish speculation in the Indian and Italian media that a bidding war for Aston Martin had broken out between Indian automotive company Mahindra & Mahindra and Italian private equity group Investindustrial. Both parties declined comment when contacted by CFOWorld.

For the first nine months of 2012, Aston Martin reported a decline in revenues by 19.0 percent to £305 million, mainly driven by a 19.5 percent decline in volume sales to 2,520 vehicles from 3,132 vehicles in the first nine months 2011.

The Moody’s said its review will mainly but not exclusively focus on the outcome of the current discussion to secure a capital increase and its possible impact on Aston Martin's capital structure and liquidity profile as well as the company's ability to turn around its operating performance and cash flow generation based on higher volume sales driven also by a strong demand for its new model launches Vanquish and DB9.

The inability of the company to raise equity and materially improve its liquidity profile within the next couple of weeks would most likely result in a downgrade of Aston Martin's ratings that might not be limited to one notch according to Frey.


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