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CREDIT RATING: Continental (CONGR Baa2/BBB/BBB): S&P Outlook Developing

CREDIT RATING

Our base case remains a neutral scenario, albeit with risks tilted to the downside. S&P notes there is some headroom on credit metrics.

  • S&P changes its outlook for Continental from Stable to Developing following the announced potential spinoff of Automotive.
  • In line with our previous comments, they see higher margins and higher leverage for the remaining group.
  • They outline a neutral scenario where proportional lease and pension liabilities transfer to the SpinCo with no change in financial policy.
  • A negative scenario would involve cash balances transferring to the SpinCo without the above liabilities. Elevated transaction costs, change in financial policies, weaker operating performance or further cash injections are cited as potential negative credit drivers.
  • A positive scenario sees improved operating performance for Automotive, allowing it to support higher debt. 

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