Goodyear Rolls On With Refinancing Plans

Goodyear Tire & Rubber Co. has a new $680 million funded credit facility that replaces a revolver of the same size that was set to expire next year.

  • 03 Sep 2004
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Barb Gould

Goodyear Tire & Rubber Co. has a new $680 million funded credit facility that replaces a revolver of the same size that was set to expire next year. The refinancing was a requirement of the United Steelworkers of America, the labor union that has played a significant role in the company's restructuring process. However, the new facility is part of a broader strategy of debt refinancing that also includes asset sales, equity issuances and refinancing bonds, said Barb Gould, Goodyear's director of investor relations.

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.

  • 03 Sep 2004

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