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Dana Financing Luxembourg Sarl -- Moody's assigns B2 rating to Dana Incorporated's new senior unsecured notes

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Rating Action: Moody's assigns B2 rating to Dana Incorporated's new senior unsecured notesGlobal Credit Research - 29 Apr 2021New York, April 29, 2021 -- Moody's Investors Service (Moody's) assigned a B2 rating to Dana Incorporated's (Dana) new $400 million senior unsecured notes. All other ratings are unaffected including the Ba3 corporate family rating and Baa3 senior secured rating. The rating outlook is negative.Dana has labeled the bonds as green bonds given its intention to use the proceeds for recently completed or future eligible green projects such as clean transportation, renewable energy, sustainable water and wastewater management or green buildings. The proceeds from the proposed notes will be used to help repay the 2024 senior unsecured notes.RATINGS RATIONALEDana's ratings reflect a strong competitive position as a key, global supplier of drive-line products and thermal sealants for light vehicle and off-road vehicles. The product mix is weighted towards light trucks and SUVs in North America, a segment that continues to grow as a percentage of overall vehicle production levels. Moody's adjusted debt-to-EBITDA is currently in the mid-5x range but expected to fall steadily to below 4x by year-end 2021. Prior to 2020, the EBITDA margin was consistently in the low-double digit range and should approach that level again in 2021 with Moody's expectation for continued end market stability leading to improved earnings and cash flow.The negative outlook reflects a more measured rebound in results that should accelerate in the latter half of 2021, positioning Dana for a sharper uptick in results for 2022 and beyond.The SGL-1 Speculative Grade Liquidity Rating indicates very good liquidity with Moody's expectation for Dana to maintain a solid cash position and ample availability under the upsized $1.15 billion revolving credit facility set to expire 2026. At March 31, 2020, Dana had cash and marketable securities of approximately $510 million and near full availability under the revolving credit facility. Moody's anticipates free cash flow generation to rebound in 2021 even with higher working capital and capital expenditures needed for growth.Moody's took the following rating action on Dana Incorporated:- Senior Unsecured Regular Bond/Debenture, assigned at B2 (LGD5)The following rating for Dana Incorporated was unaffected, but an LGD adjustment has been made:- Existing Senior Secured Bank Credit Facility, at Baa3 to (LGD1) from (LGD2)FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be upgraded with expectations of sustained revenue growth leading to EBITA-to-interest over 3.5x, debt-to-EBITDA of 3x or below and consistent and significant free cash flow, while maintaining a very good liquidity profile. Other factors supporting an upgrade would be continued cost structure improvements to better position the company to manage through cyclicality and continued discipline in return of capital to shareholders.Ratings could be downgraded if Moody's believes that through the second-half of 2021 Dana's EBITA-to-interest coverage is expected in the 2x range or debt-to-EBITDA is sustained at or above 4x. Other developments that could lead to downward rating pressure include deteriorating liquidity and aggressive debt-funded acquisitions or shareholder returns that result in leverage remaining elevated.Dana's role in the automotive and commercial vehicle industries exposes it to material environmental risks arising from increasing regulations on carbon emissions. Automotive manufacturers and commercial fleet operators (particularly in the off-highway markets) continue to introduce electrified products to meet increasingly stringent regulatory requirements. Dana has strategically and aggressively acquired electrification technology and electrified product offerings to complement its own branded product offerings.The principal methodology used in this rating was Automotive Supplier Methodology published in January 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1170606. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Dana Incorporated is a global manufacturer of drive systems (axles, driveshafts, transmissions), sealing solutions (gaskets, seals, cam covers, oil pan modules) and thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling) serving OEMs in the light vehicle, commercial vehicle and off-highway markets. Revenues for the latest twelve months ended March 31, 2021 were approximately $7.4 billion.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Eric Greaser Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Robert Jankowitz MD - Corporate Finance Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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