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Rating Action: Moody's affirms Terex's CFR at B1, upgrades senior unsecured to B2, and assigns Ba2 to new senior secured bank debt; Outlook to stableGlobal Credit Research - 16 Mar 2021Approximately $925 million of bank debt ratings assignedNew York, March 16, 2021 -- Moody's Investors Service ("Moody's") affirmed Terex Corporation's ("Terex") corporate family rating ("CFR") at B1, probability of default rating at B1-PD, and upgraded the senior unsecured rating to B2 from B3. Terex's speculative grade liquidity rating is unchanged at SGL-2. Moody's assigned the company's new bank credit facility a Ba2 senior secured rating. The rating outlook is changed to stable from negative.The change to a stable outlook reflects Moody's view that Terex will continue to deleverage from currently high levels as revenue and profitability rebound from a challenging 2020. However, Moody's view does not anticipate a rapid snap-back in demand for Terex's specialized equipment, but rather gradual improvement as construction activity picks up and equipment utilization rates at equipment rental companies approach pre-recession levels. In the meantime, Terex's liquidity is expected to be supported by over $1 billion of aggregate cash and revolver availability."The stabilization of Terex's outlook is prospective and anticipates continued improvement in the credit profile, but credit metrics are weak and the ratings will face pressure should the economy or construction activity weaken again," said Moody's Vice President and lead analyst for Terex, Brian Silver.RATINGS RATIONALETerex's ratings reflect the company's exposure to cyclical end-markets that can significantly reduce demand for Terex's Aerial Work Platforms ("AWP") and Materials Processing ("MP") products for a prolonged period of time. It also reflects Moody's expectation that debt-to-EBITDA (after Moody's standard adjustments) will approach 5 times in 2021, improving considerably from 7.5 times debt-to-EBITDA for 2020 pro forma for the recent debt paydown and the refinanced debt structure. Terex generates low margins in AWP that Moody's expects will persist for the foreseeable future. In addition, cash flow may be susceptible to very large working capital swings from a build-up of inventories anticipating sales or from inflationary pressure on input costs.However, Terex benefits from having well established brands and solid market position, including its namesake Terex, as well as Genie, Powerscreen, and Fuchs among others. Terex also has good scale, but revenue declined to $3.1 billion in 2020 as a result of significantly lower pandemic influenced sales. Moody's expects Terex to realize mid-single digit growth in 2021. It will be some time however, for the company to achieve pre-pandemic revenue levels, likely only once the equipment replacement cycle is well underway.The company also has healthy customer and geographic diversification with a significant portion of its revenue generated outside of North America. Moody's expects that the company will manage inventories by aggressively keeping production in line with demand, but will use considerable working capital once sales grow. In addition, the AWP replacement cycle could begin as soon as the second half of 2021, which could help spur growth.The SGL-2 speculative grade liquidity rating reflects good liquidity resulting from a healthy amount of balance sheet cash and access to external liquidity. Terex had $660 million of cash at December 31, 2020, but pro forma cash is about $555 million, as the company used $100 million of cash and $100 million from the sale of Terex Financial Services (TFS) receivables to repay debt in February 2021. Moody's calculated free cash flow of slightly over $250 million in 2020, driven partly by sales of finance company receivables. In 2021, Moody's anticipates free cash flow to be negative roughly $50 million as funds from operations will improve, but they will be more than offset by an increase in working capital and capital investment needs in concert with higher demand, and fewer finance receivables sales.Moody's believes that Terex has limited social risk, other than the operational challenges in staffing its production facilities. However, the company does have some environmental risk and, similar to other heavy manufacturers, generates hazardous and non-hazardous waste in the normal course operations and is subject to numerous environmental laws and regulations. Moody's also believes that Terex has limited governance risk, as the company is publicly traded and adheres to typical listing standards and has a well-defined board structure.The secured debt rating of Ba2 takes into account the priority of claim the secured holders have with their first lien position, as well as the relative amount of unsecured claims which are in a first loss position. The senior unsecured rating was upgraded to B2 to reflect the improved recovery prospects of the senior unsecured class because of the lowered overall debt amount and the change in composition of secured and unsecured claims with the new financing. Moody's will withdraw the ratings on Terex's existing debt obligations that are being refinanced at the close of the transaction.The stable outlook reflects Moody's expectation that Terex will grow revenue in the mid-single digits, while EBITDA margin increases from 2020 such that debt-to-EBITDA approaches 5 times at year end 2021.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be downgraded if debt-to-EBITDA does not steadily reduce to approach 5x by the end of 2021 expected to be sustained above 7 times or forward free cash flow is likely to turn negative. Also, with a more aggressive financial policy with an increased focus on acquisitions or shareholder returns, or a material deterioration in liquidity, the ratings could be downgraded.Although not anticipated in the near-term, the ratings could be upgraded if debt-to-EBITDA is sustained below 4 times, free cash flow-to-debt is sustained above 5%, and the company can improve and sustain materially higher margins at AWP, in particular, and MP.The following rating actions were taken:Assignments:..Issuer: Terex Corporation....Senior Secured Multi-Currency Revolving Credit Facility, co-issued by New Terex Holdings UK Limited, Terex International Financial Services Company Unlimited Company and Terex Australia Pty Ltd, Assigned Ba2 (LGD2)....Senior Secured Term Loan Bank Credit Facility, Assigned Ba2 (LGD2)....Senior Secured Revolving Credit Facility, Assigned Ba2 (LGD2)Affirmations:..Issuer: Terex Corporation.... Corporate Family Rating, Affirmed B1.... Probability of Default Rating, Affirmed B1-PDUpgrades:..Issuer: Terex Corporation....Senior Unsecured Regular Bond/Debenture, upgraded to B2 (LGD5) from B3 (LGD5)Outlook Actions:..Issuer: Terex Corporation....Outlook, Changed To Stable From NegativeThe principal methodology used in these ratings was Manufacturing Methodology published in March 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1206079. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Norwalk, CT, Terex Corporation (NYSE: TEX) is a global manufacturer of lifting and material processing products and services. The company reports in two business segments: Aerial Work Platforms (AWP) and Materials Processing (MP). Terex generated revenue of $3.1 billion for the year ended December 31, 2020.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. 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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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are 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_1243406.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. Brian Silver, CFA Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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