Moody's Investors Service today reduced multiple credit ratings for Titan International, Inc., lowering the corporate family rating to B2 from B1 and changing the outlook from negative to stable. The agency also downgraded the company's probability of default rating to B2-PD from B1-PD, its backed senior secured global notes to B2 from B1, and its speculative grade liquidity assessment to SGL-3 from SGL-2.
The rating actions reflect Moody's expectation that Titan's credit metrics will remain weaker than previously forecast as global demand for agricultural equipment stays constrained and construction equipment markets remain uneven through 2027. Moody's cited impediments to a recovery in new equipment spending that include low commodity prices, elevated interest rates and macroeconomic pressures attributed to tariffs and the conflict in the Middle East. The firm's consumer-facing business is also under pressure from general inflation, and Moody's noted that a significant portion of that revenue is discretionary.
In its review, Moody's adjusted Titan's governance score to G-4 from G-3 and moved the Credit Impact Score to CIS-4 from CIS-3. The ratings firm pointed to limited availability under Titan's revolving credit facility and anticipates the continuation of negative free cash flow into 2026. Moody's projects an EBITA margin of about 2% in 2026 - roughly unchanged from 2025 - before modestly exceeding 2% in 2027. It sees debt-to-EBITDA in the high-6x range for 2026, trending toward roughly 6x in 2027.
Moody's noted that market softness has more than offset Titan's structural cost-reduction measures designed to mitigate earnings declines when production volumes fall. The benefits expected from Titan's acquisition of the Carlstar Group LLC in the first quarter of 2024, which was partly funded with debt, have been weakened by the demand downturn. Aftermarket revenue has not sufficiently offset the pullback in new equipment spending, reducing the acquisition's immediate positive impact on results.
On liquidity, the agency expects Titan to retain adequate near-term headroom, supported by a cash balance Moody's estimates at roughly $150 million to $200 million and modest borrowing availability - approximately $50 million projected at the end of the first quarter of 2026 - under the company's $225 million asset-based lending facility, which matures in February 2029. Despite that liquidity, Moody's expects free cash flow to remain negative in the current year as earnings stay weak, with a recovery to breakeven or modestly positive cash generation anticipated in 2027.
The downgrade signals Moody's assessment that persistent demand weakness for new agricultural and construction equipment, combined with macroeconomic headwinds and constrained aftermarket support, will keep Titan's earnings and cash flow under pressure through 2026 even as modest improvements are forecast for 2027.