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CREDIT RATING: Continental (CONGR Baa2/BBB/BBB[P]): Fitch Outlook Positive

CREDIT RATING

A more positive take here from Fitch than S&P’s outlook developing. The difference is less of an emphasis on leverage, which is set to increase on the transaction with the final impact still uncertain depending on where liabilities land.

  • Fitch expects improved EBIT and FCF margins following the proposed spinoff of the lower-margin automotive (parts) division.
  • They see the reduced diversification but decreased cyclicality.
  • They assume SpinCo will be net cash with Continental assuming all existing debt resulting in 0.5 turns increase in net leverage. Nonetheless they see that more than offset by the margin improvement.
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