Rating Action: Moody’s affirms Adient’s ratings with CFR at B2 and senior secured at Ba3; outlook changed to positiveGlobal Credit Research – 29 Mar 2021New York, March 29, 2021 — Moody’s Investors Service (Moody’s) affirmed the ratings of Adient Global Holdings Ltd (Adient) including the corporate family rating (CFR) at B2, the Probability of Default Rating at B2-PD and the senior unsecured at B3, and the senior secured rating at Adient US LLC at Ba3. The Speculative Grade Liquidity Rating is SGL-2. The rating outlook was changed to positive from negative.The action reflects Moody’s expectation that Adient will benefit from the near-term recovery in global light vehicle production, which Moody’s expects to be about 7% for 2021, augmented by inventory rebuilds, heightened focus on platform launch management and ongoing operational initiatives. The action also incorporates Adient’s plan to end the Yanfeng Adient Seating Co., Ltd. (YFAS) joint venture in China, which is expected to generate after-tax proceeds to Adient of approximately $1.4 billion, providing the opportunity to significantly reduce debt over the course of 2021.RATINGS RATIONALEAdient’s ratings reflect its position as the leading global supplier of automotive seating and related components, strong regional and customer diversification and long-standing relationships with all major automotive original equipment manufacturers (OEM). These positives are balanced with high financial leverage, modest margins, a recent record of operational missteps that the company is working through and negative free cash flow exacerbated by restructuring outlays.The YFAS transaction is subject to government and regulatory approvals and is expected to be completed by the end of calendar year 2021 – Adient will receive approximately $700 million in cash around the August/September timeframe and approximately $700 million in cash by December 2021. The phased receipt of proceeds drives the step process for significantly improving balance sheet flexibility. Accelerated debt repayment was initiated by the recent tender offer to purchase up to $640 million of the 7% senior first lien notes due 2026.Moody’s adds that the termination of the YFAS JV is a noteworthy shift in Adient’s traditional strategy for operating in China. While the company maintains meaningful exposure to the world’s largest vehicle market through other JVs, the sale of its YFAS interest will place greater importance on Adient’s ability to independently increase market share.Moody’s expects debt-to-EBITDA (including Moody’s standard adjustments but excluding equity income and potential YFAS proceeds used for debt repayment) to fall towards 10x by Adient’s September 30, 2021 fiscal year end. Free cash flow should demonstrate good progress towards breakeven with the steady recovery in vehicle production rates. Considering the possible debt repayment from the YFAS proceeds, debt-to-EBITDA could fall to the mid-8x range by September 2021 and further towards 5x by September 2022 to go along with positive free cash flow.The positive outlook considers the benefits from the continued recovery in light vehicle production volumes with the potential for operations to modestly improve, as well as the potential, and significant, de-levering opportunity presented by proceeds received from the termination of the YFAS joint venture.The SGL-2 Speculative Grade Liquidity Rating includes Moody’s expectation for Adient to maintain good liquidity through 2021 supported by a solid cash balance and substantial availability under Adient US LLC’s $1.25 billion asset-based lending facility (ABL) that is set to expire May 2024. At year-end 2020, availability under this facility totaled $930 million after deducting posted letters of credit. Cash is expected to fall from the December peak, especially if management executes the phased de-levering plan through 2021 but should remain supportive of the good liquidity profile.Adient enters into supply chain financing programs to sell accounts receivable without recourse to third-party financial institutions. Amounts under these programs were approximately $170 million at December 31, 2020. While not expected, if the company is unable to maintain and extend these receivable programs, additional borrowings under the revolving credit facility would be required to meet liquidity needs.The following actions were taken:Ratings Affirmed:..Issuer: Adient Global Holdings Ltd…. Corporate Family Rating, at B2…. Probability of Default Rating, at B2-PD….Senior Unsecured Regular Bond/Debenture, at B3 (LGD5)..Issuer: Adient US LLC….Senior Secured Bank Credit Facility, at Ba3 (LGD2)….Senior Secured Regular Bond/Debenture, at Ba3 (LGD2)Outlook Actions:..Issuer: Adient Global Holdings Ltd….Outlook, Changed To Positive from Negative..Issuer: Adient US LLC….Outlook, Changed To Positive from NegativeSpeculative Grade Liquidity Rating..Issuer: Adient Global Holdings Ltd…. Speculative Grade Liquidity Rating, remains SGL-2FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be upgraded with earnings improving at a faster pace than recovering automotive demand driven by stability in operations, leading to meaningful progress towards breakeven/positive free cash flow. Debt-to-EBITDA below 5x (excluding consideration for equity income from joint ventures) would also be a key consideration for positive rating action. Debt repayment from the YFAS proceeds would accelerate significant improvement in credit metrics, notably leverage towards 5x and positive free cash flow boosted by sharply lower interest expense. The ability to manage rising raw material inputs and good execution of continued restructuring actions, which should ultimately translate into margin expansion, will also be viewed favorably.The ratings could be downgraded due to the inability to improve margins, the loss of or meaningful decline in volume from a major customer, or if already weak free cash flow worsens during 2021. Weaker liquidity, including increased reliance on the ABL to go along with a meaningfully lower cash balance, could also result in negative rating action.Adient’s products are not directly exposed to material environmental risks arising from increasing regulations on carbon emissions. While automotive manufacturers continue to launch electrified products to meet increasingly stringent regulatory requirements, demand for Adient’s products are not dependent on a vehicle’s powertrain. However, Adient’s ability to further lightweight its seating products will be supportive of industry trends to improve fuel economy.Adient plc, the parent company of Adient Global Holdings Ltd, is one of the world’s largest automotive seating manufacturers with longstanding relationships with the largest global OEMs in the automotive space. Automotive seating solutions include complete seating systems, frames, mechanisms, foam, head restraints, armrests, trim covers and fabrics. Adient operates in the Chinese automotive seating and interiors market through several joint ventures. Revenues for the latest twelve months ended December 31, 2020 were approximately $12.6 billion.The principal methodology used in these ratings 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.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. 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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. Eric Greaser 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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