Schaeffler May Get Rating Upgrade After Share Sale, Moody's Says

Schaeffler AG’s plan to use proceeds from an initial public offering to pay off debt may result in a ratings upgrade, according to Moody’s Investors Service.

The move may be enough to allow for an upgrade of more than one notch, provided deleveraging is “material,” Moody’s said. The company placed Schaeffler’s Ba3 rating, three steps below investment grade, under review for an upgrade, it said in a statement.

The maker of ball bearings and automotive parts will rearrange about 3.6 billion euros ($4.05 billion) of debt as it seeks to reduce its liabilities with the share-sale proceeds, according to statements published today on its website. The family-owned German company agreed a term loan, revolving credit facility and bridge loan with four banks and will redeem all outstanding bonds of its Schaeffler Holding Finance unit, subject to conditions.

The current rating is “primarily constrained by the group’s high indebtedness,” with reported debt at operating and holding-company level of about 10 billion euros, Moody’s said.

Schaeffler, based in Herzogenaurach in southern Germany, may raise as much as about 3 billion euros in the IPO, according to people familiar with the matter who asked not to be named because the details aren’t public. It plans to list a stake of about 25 percent in Frankfurt by selling as many as 166 million new and existing shares, the manufacturer said in its statement Monday.

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