Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, and IC Bus™ brand school and commercial buses. The company also provides truck and diesel engine service parts and financing services. Navistar has four operating segments: North America Truck, North America Parts, Global Operations and Financial Services.
The heavy truck manufacturer has been impacted in 2015 and 2016 by a softening market for heavy trucks, both in the U.S. and abroad. However, the Company was boosted in September 2016 by a major minority equity investment from VW, which has brought fresh capital, hopes of a broader sales strategy and the possibility of a future acquiror. However, at the end of 2016 industry and company fundamentals remain challenging. Thankfully the Company is public and there is plenty of financial information available. According to Advantage Data, there were 3 BDCs with $27mn of exposure to the Company at June 2016. All were members of the FS Investment Group and all were in Subordinated Debt due in 2021, and had written down the position by 20-27%. Then the Credit Trend was down but the VW investment-regardless of longer term business conditions concerns-are likely to cause the next valuation to rise. The BDC Credit Reporter has a Credit Rating of 3 on the Company, but we remain concerned about the ability of this highly leveraged company in a cyclical industry to meet all obligations, even debt not due till 2021.