The Goodyear Tire & Rubber Co.'s new $1.3 billion credit will not carry the restrictive assignment language that has caused problems with the company's existing credit. Goodyear's ability to nix trades in the secondary loan market had lenders concerned about liquidity (LMW, 2/17). But lenders are applying some leverage with the company back in the market, hat in hand. One buysider noted that Goodyear changed its tune because "it needs us now." Keith Price, Goodyear's spokesman, declined to comment on the change in stance on trade approvals.
A banker familiar with the facility said the new deal would just need consent for assignments from the agents. Borrower approval is only needed in the event of a default. "Some banks have this [company's debt] in workout and their answer is to unload it fast," he noted, explaining why freer reign on assignments is vital. J.P. Morgan and Citibank lead the asset-based facility, which is secured by the inventory and receivables of the world's third-ranked tire maker.
The new assignment-friendly facility accompanies an overhaul of Goodyear's existing lines. The banker said the new assignment terms would most likely follow suit in the revamped deals. The company has been working with J.P. Morgan--lead on the company's existing credits--to restructure, refinance and extend present debt facilities. An existing lender meeting was held last Thursday explaining the revamped plans. Lenders were asked to rollover 90.9% of their commitments to Goodyear's existing $575 million 364-day revolver due next August and the $800 million term loan due March 2004 into a new European-based deal that extends to April 2005, said the banker, adding that the restructured credit needs 100% approval. "That's a very hard thing to do," he said. But the buysider said the banks would probably support the plan in the end. "Goodyear is a staple of American industry," he said. Lenders on the company's $750 million, five-year revolver were also asked to modify certain covenants, the banker added.
The new 2006 maturing credit is contingent upon the success of the stressed company's reworked deals with the bank group, which reportedly includes 30 lenders. J.P. Morgan extended waivers on certain covenants through April 4. Price said a covenant requiring a $500 million pension fund payment and a minimum net worth covenant were softened until that date.
The new deal includes an $800 million term loan and a $500 million revolver and is priced in the LIBOR plus 3 1/2% range with a 75 basis point commitment fee. Pricing on the existing lines rest in the tighter LIBOR plus 1 1/4%-2% range. The banker could not confirm if the existing deals' pricing would flex up with the restructured facilities.