TRW Automotive Gets Upgrade; Outlook Changed On InSight

Standard & Poor's has raised the ratings on TRW Automotive's $1.25 billion term loan debt and $500 million undrawn revolver from BB to BB+ with completion of the company's initial public offering and amended and restated credit facility. The transaction has allowed the company to reduce debt, bringing leverage down to about 2.8 times. Joseph Cantie, TRW's v.p. and cfo, noted that the company's ability to lower its net debt by about $800 million over the last 11 months since the company's leveraged buyout was one of the key drivers of the upgrade. Up ahead, S&P expects TRW to gradually reduce leverage and strengthen credit measures.

Despite the debt reduction, S&P notes that the ratings reflect a somewhat below average financial profile characterized by sub-par cash flow protection and a moderately heavy debt load. TRW's business profile is constrained by the competitive and cyclical nature of the original equipment segment of the automotive industry. Furthermore, S&P explains that pricing pressure is intense and requires suppliers to continually improve productivity.

Still, TRW does benefit from its leading market share in most of its products and technical capabilities. Good geographical, platform, and consumer diversity also supports the company and reduces earnings volatility. Moreover, the company presents moderate growth prospects partially through the development of products that improve vehicle performance, safety, space utilization, and fuel economy, which are key concerns for auto manufacturers and consumers.

* S&P has also revised the outlook for InSight Health Services Holding Corp.'s ratings to negative from stable as the company continues to pursue debt-funded acquisitions in lieu of expected deleveraging. The change in outlook affects the B+rating on the company's $325 million of senior secured bank loans. Now the company has signed a letter for another acquisition and the financing could potentially exceed the $25 million of unused capacity on InSight's $50 million delayed-draw term loan, requiring the need for additional financing.

The outlook also reflects the changing business environment for InSight's mobile imaging segment, which is faced with lower hospital admissions and vendor-financing arrangements that have allowed the hospitals to purchase their own diagnostic imaging machines rather than use InSight's services. But S&P also notes that the company's financial measures offer near-term insulation. The company's rising EBITDA has allowed its lease adjusted leverage to decrease to about 5.3 times. Calls to Brian Drazba, the company's cfo, were not returned by press time.