Monday, June 29, 2009

Good news in auto-land (TRW)

AlphaNinja - JP Morgan upgraded TRW Automotive (TRW) to overweight this morning, boosting its price target to $15 from $10. The upgrade is due to TRW's Friday afternoon anouncement that it had successfully restructured its debt covenants. They now enjoy looser terms, in exchange for paying a higher rate.

JPMorgan said the credit amendment

"resulted in sizable covenant ratio headroom and no reduction to (large) revolver capacity, making TRW a clear survivor, in our view."

TRW shares are up 24% on the news, and good for them! Details below for those interested in the new covenant ratios, which really start to tighten up in late 2010....

Up almost an identical percentage on the news (or short-covering, who knows) is Lear Corp (LEA)-->> even though these folks are hurdling toward bankruptcy.

Below is a CMA Datavision snapshot of Lear's Credit Default Swaps, showing a 95% chance of defaulting on their debt -->>the common stock (last in line to be paid in a bankruptcy)will be worthless. That quote below means that it would cost you $16mil to insure against $10m of Lear Debt -->>NOT FUN!

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