announced Friday morning that it had renegotiated the covenants on $2.5 billion worth of debt, investors responded tepidly.
But when a
analyst upgraded TRW shares Monday morning, citing those very renegotiated covenants, market participants -- and the banks' own equities sales force -- evidently took notice.
In morning trading Monday, TRW shares jumped 16%, or 44 cents, to $10.44. More than 600,000 shares had changed hands in the first 45 minutes of the session; average daily volume is 1.2 million shares.
JPMorgan's automotive analyst, Himanshu Patel, lifted his rating on TRW to overweight from neutral, and raised his stock price target to $15 from $10.
Patel called TRW, a maker of car-safety gear such as air bags and one of the world's largest auto-industry suppliers by revenue, a "clear survivor." Other parts companies have not been so fortunate, even as the federal government several weeks ago rejected an appeal by the industry for additional financial aid.
appears to be on the verge of bankruptcy, and
has been cited as another potential victim.
In his research note, Patel wrote that the amended debt strictures give the company more room to maneuver than he had expected. Also, he said, the deal "all but ensures" that the company won't breech the new terms before the economy recovers.
Still, TRW had to make concessions, of course -- namely, an increased interest rate that will cost the company about $270 million a year, according to Patel.
TRW and JPMorgan are linked by more than analysts' coverage. The investment banks that helped TRW arrange and syndicate the debt under question, back in 2007, were
Bank of America
and JPMorgan. Indeed, JPMorgan is an advisor to a large number of auto-industry suppliers.
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