(September 3 – 15:45) – Moody’s Investors Service is rating Magna International Inc.’s US$250-million and C$150-million preferreds at “baa1.”
The rating service says the issue will be used to fund Magna’s US$250 million cash infusion in Ventures. Ventures is a new firm that will operate Magna’s US$300 million worth of non-auto-related real estate assets. Initially the deal will hurt Magna’s financial agility. Still, the company generally remains in good fiscal shape.
Moody’s views Magna’s spinoff as a positive, but the efficiency of the exit remains a key consideration.
As for Magna itself, Moody’s says the firm is a market leader with a growing product line, good technology, and a flexible cost structure. Earnings and cash flow are good, and its balance sheet is flexible.
Magna plans to take the firm public by the end of 1999.
Moody’s says the new preferreds amount to junior subordinated debentures, with a 49-year maturity. It can defer interest payments for five years. It can pay interest in stock, and redeem the securities after five years or at maturity with its own stock.
-IE Staff
For more information, please see: