Sept 17 - Fitch Ratings has downgraded the Issuer Default Ratings (IDR) for Navistar International Corporation (NAV) and Navistar Financial Corporation (NFC) to ‘CCC’ from ‘B-'. The rating Outlook is Negative. A full list of rating actions is shown at the end of this release.
The rating downgrades and Negative Rating Outlook reflect the company’s heightened liquidity risk and negative manufacturing free cash flow (FCF) which could continue into 2013. A significant number of challenges will need to be addressed to avoid liquidity pressures, and FCF could be impaired in the near term by costs related to the implementation of NAV’s revised engine strategy, workforce reductions, and possible additional restructuring. Other items that could reduce FCF include lower sales volumes expected in the fourth quarter, and lower margins related to the use of Cummins SCR technology, higher warranty expense for NAV’s emissions compliant engines, and the cost of non-conformance penalties (NCPs).