Moody’s: Credit impact of European auto supplier demergers depends on how they split

Deniz Kılınç / İstanbul, May 4 (DHA) – Moody’s Investor’s Service has declared that the majority of European auto parts supliers "will continue their streak of demergers to boost shareholder returns and create smaller, more flexible and transparent business".
Published by Moody’s, "Automotive parts suppliers- Europe: More demergers likely, deal structure to be key determinant of credit impact" report is said to be an update to markets and does not constitue any rating, Moody’s also underlined that while the resulting smaller scale and reduced diversification is usually credit negative, the specific credit impact for the companies hinges on the structure of any demerger.
 Moody’s Vice President and Senior Credir Offices Matthias Heck’s comments about the update are as follows: "Spinning off a business is usually credit negative as there are no cash proceeds, but a disposal or sale for cash is typically credit positive as it allows the seller to use the proceeds to reduce debt or invest in core operations. A cmbined spin-off and disposal is the ost common means of pursuing a breakup."