Cooper-Standard downgraded by S&P Global Ratings to CCC+ on lower sales, volumes

Cooper-Standard Holdings Inc. was downgraded today by S&P Global Ratings to CCC+, from B-, retaining its negative outlook, with the agency citing lower sales and production volumes as the auto industry continues battling supply chain issues. The company's secured debt was also downgraded to CCC+, from B-, while its unsecured notes were dropped to CCC-, from CCC.

Cooper-Standard has been hurt by the decline in North American auto production because of a persistent semiconductor chip shortage, as well as by inflation's negative impact on inputs such as rubber and steel, according to S&P Global Ratings. The agency estimates that the challenges have resulted in more than $200 million in negative free operating cash flow in 2021 and a projection of continued negative FOCF over the next couple of years.

Ratings said it believes the company's leverage level is "unsustainably high," projecting it will reach around 20x this year before dropping toward 8x by the end of 2023. Ratings considers Cooper's liquidity "adequate," with about $248 million of balance sheet cash and $147.5 million of revolver availability on Dec. 31, 2021.

Noting that the company has a term loan maturity in November 2023 and that its asset-based loan has a springing maturity in August 2023, Ratings said that "given [Cooper-Standard's] very high leverage, we believe it may be difficult to refinance this debt."

In December, Moody's downgraded Cooper subsidiary Cooper-Standard Automotive Inc. to Caa1, from B3, with the agency citing its expectation for continued weak results as headwinds buffet the company well into 2022. The agency also downgraded the company's other debt by one notch.

Cooper-Standard is a global automotive supplier of sealing and trim, fuel and brake delivery systems and fluid transfer systems.