Moody’s puts Aston Martin under review for a credit downgrade

Article by Christian A., on December 5, 2012

Moody's Investors Service has placed Aston Martin under review for a credit downgrade as it runs through its cash reserves. Aston Martin is the luxury-car maker controlled by Investment Dar Co. of Kuwait. In a statement, Moody's said that it may lower Aston Martin's non-investment grade B3 rating, which is defined as having "high credit risk," after the British carmaker posted negative free cash flow in the third quarter of 2012.

Moody's analyst Falk Frey said that the review was prompted by a considerable decline in the liquidity profile of Aston Martin as of the end of September 2012, as the result of a weakened cash generation and operating performance in the third quarter.

On Nov. 28, 2012, Janette Green, a spokeswoman for the company, said that Aston Martin is in "advanced" talks to sell new shares to investors to increase funding and guarantee that it can pursue growth plans.

Moody's said that if capital is increased, there would be a "material positive" impact on the finances of Aston Martin. Sources said last week that Aston Martin got separate bids from Investindustrial and Mahindra & Mahindra Ltd. for 50 percent of the sports-car maker. The sources added that an offer of slightly below GBP250 million was submitted by Investindustrial, a European private-equity fund based in London.

However, Indian automaker Mahindra made a higher bid. Mahindra -- owner of SUV maker Ssangyong Motors and considered as the largest tractor maker in the world -- has seen fellow Indian company Tata Motor become successful in acquiring Jaguar Land Rover four years ago.

An insider said last week that whichever company wins during the bidding will receive 50 percent of voting rights and a 40 percent equity stake. It was also reported that the Mahindra bid may be higher but then, Investindustrial is planning to use technology and car components from AMG, the Mercedes-Benz unit that produces high-performance models.

If you can recall, Investment Dar led a group of investors or companies that acquired Aston Martin from Ford Motor Co. in 2007, paying around GBP479 million ($925 million). An analyst remarked that Investment Dar is seeking to recover its investments in Aston Martin, which means a value of around $1 billion.

Aston Martin continues to get its engines from Ford but it isn’t anymore able to access Ford's other resources after it was sold. This means that it’s the only global luxury brand that is not a part of a larger auto group. In 2007, Investment Dar paid 503 million pounds to purchase Aston Martin from Ford.

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