S&P lowers Exide Technologies ratings

Venkatachari Jagannathan
30 March 2002

Chennai: Fearing a possible default in its debt obligations in the next one month, Standard and Poors (S&P) has lowered its rating of the global storage batteries major Exide Technologies.

The rating agency has downgraded Exides credit rating to double C from triple C. Exide continues to be on the CreditWatch list of S&P. The US-based Exide has about $1.4 billion in debt, and the failure to meet upcoming debt service requirements will result in a lowering of ratings to D.

The companys UK subsidiary, Exide Technologies (formerly CMP Batteries), is Tudor Indias parent, selling the Prestolite brand automotive batteries. Exide is the battery supplier for the Reva Electric car manufactured in Bangalore.

Says S&P analyst Lisa Jenkins: "We believe that Exides liquidity has become severely constrained and that this could prevent the company from meeting debt-service requirements."

Exides operating results and cash generation have been under pressure for the past several years due to its onerous debt burden, intense industry pressures, costs associated with internal restructuring activities and legal issues. Pressures have recently intensified due to the slowing demand in both its automotive and industrial battery businesses. Its cash flow protection measures are currently quite weak. Earnings pressures, cash requirements of restructuring actions and debt-service commitments have all combined to significantly constrain the companys financial flexibility. The availability under its revolving credit facility was just US $32 million on 31 December 2001, and presently it is believed to be even more constrained. Exide was in violation of covenants under its bank agreement as of 31 December 2001, and received a waiver through 12 April 2002.

Exide has a bond interest payment due on 15 April 2002.  It also faces interest and principal payments on its bank debt in the coming week.