Fitch downgrades auto parts maker First Brands on debt concerns

Sept 25 (Reuters) - Rating agency Fitch said on Thursday it was downgrading automotive parts maker First Brands Group's long-term issuer default rating to "CCC" from "B" amid concerns the company might have to pursue debt restructuring or file for bankruptcy.

"The downgrade reflects Fitch's view that the company's options for addressing its debt have become increasingly limited to off-market options and it faces a higher risk of a distressed debt exchange or bankruptcy," the rating agency said.

A distressed debt exchange is a type of out-of-court debt restructuring where a company facing financial distress exchanges existing debt for new debt with different terms to avoid bankruptcy.

Bloomberg News reported on Thursday that the auto aftermarket supplier is moving towards filing for bankruptcy, with no restructuring plan in place. On Wednesday, a group of lenders tied to First Brands filed for bankruptcy in the Southern District of Texas, the report added.

First Brands, which is a Michigan-based private company, manufactures aftermarket auto parts such as wipers, fuel pumps and spark plugs.

As of June 28, the company's on-balance debt added up to a total of roughly $6 billion, with $4.9 billion accounting for first lien term loan borrowings, according to Fitch.

First lien loans are debts backed by collateral that give lenders first claim on a company's assets in case of default.

Fitch, however, has removed First Brands' issuer default rating and other grades from "Rating Watch Negative," suggesting that another downgrade is unlikely in the near term.

The lowest IDR rating is "D" — indicating that an issuer, in Fitch's opinion, has entered into bankruptcy filings.

First Brands did not immediately respond to a Reuters request for comment.