After auto parts maker TRW Automotive Holdings (TRW) announced Friday that lenders have eased some of its credit terms, J.P. Morgan analyst Himanshu Patelthis morning raised his rating on the stock to “Overweight” from “Neutral,” writing that the deal means the company is a “clear survivor” even as peers such as Lear (LEAR) face bankruptcy.
Patel says Friday’s deal terms were “better than expected,” and that company has the ability to raise its debt-to-Ebitda ratio as high as 6.75 times by the end of this year. “Even more important, TRW managed to maintain full capacity of its relatively large $2.5B secured credit facility. The new facility will result in ~$270MM of higher annualized interest expense,” which could be reduced by $50 million if the company pays down half its fully drawn $1.4 billion revolver.
With $1.5 billion of “gross liquidity” and strong management, Patel thinks the stock could reach $15 based on a P/E of 10 times his 2010 estimate of $1.50.
TRW shares today are up $1.69, or almost 19%, at $10.70.
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