Fitch Ratings Downgrades Continental AG

On 4 February Fitch Ratings downgraded Continental AG’s Long-term Issuer Default (IDR) and senior unsecured credit ratings to ‘BB’ from ‘BB+’. The Short-term IDR was affirmed at ‘B’. At the same time the Long-term IDR and senior unsecured ratings have been removed from Rating Watch Negative (RWN). According to a release issued by the agency, “the Outlook on the long-term IDR is negative” and the downgrade reflects “rapidly weakening auto markets amid the severe global recession which could further negatively impact Continental’s…plan for swift de-leveraging.”

The rating action also reportedly takes into account Fitch’s “increasing concerns” about the deteriorating credit quality of the group’s major shareholder, Schaeffler Group KG. Fitch also noted Continental’s plan to separate its rubber business, including the relatively stable and cash-generative tyre business, into a separate entity.