The new revolver extends the loan maturity to 2007. About $500 million of the facility will be used to support Goodyear's letters of credit and the remaining $180 million could be used for borrowings on a revolving basis. Investors have given their commitments to J.P. Morgan, which will hold them as collateral for the letters of credit. "We believed it was a better type of facility to issue letters of credit than a straight revolver would be," Gould stated. After securing the new facility, Goodyear is planning to refinance outstanding bonds. The tire company has $484 million of notes due next year, $351 million in 2006 and $300 million in 2007.
The initial plan was to raise just $500 million for the credit facility, but through strong lender demand it was increased. Martin King, an analyst with Standard & Poor's, noted that Goodyear was more likely to get commitments of the amount the company needed with the fully funded deal than using a traditional revolver, due to concerns about the company's earnings and credit quality (LMW, 8/2). Pricing is LIBOR plus 4 1/2% and J.P. Morgan leads the new facility with BNP Paribas. "We have a longstanding relationship with J.P. Morgan, but we do work with other banks," Gould said.
The union contract stated that Goodyear needed to raise $325 million of new financing--$250 million of debt and $75 million of equity or equity-linked securities--by the end of last year and refinance the U.S. bank facilities by the end of 2004 (10/6), which Gould said has been completed. In July, Goodyear completed a $350 million private placement of 4% convertible notes due 2034.