Levels for The Goodyear Tire & Rubber Co. $800 million term loan due 2004 have fallen from the mid 90s into the 88-90 range since the beginning of this year and lenders are finding the restrictive assignment language prohibitive. With a backdrop of banks that have been burned by bad loans, lenders are concerned about the lack of liquidity. "Trades have gotten broken; the borrower wouldn't sign off on the assignments," said a dealer.
J.P. Morgan leads the credit and Goodyear is currently in negotiations to modify some of its covenants. The exact language could not be determined but high minimum assignment thresholds and minimum hold levels are common ways a company can restrict assignments. Officials at the bank could not be reached and Goodyear spokesman, Keith Price, would not comment on the covenants.
ABN Amro, Bank of America, BNP Paribas, CIBC World Markets, Citibank, Commerzbank, Credit Lyonnais, Credit Suisse First Boston, Deutsche Bank and Société Généale are some of the banks invested in Goodyear, according to recent amendment documents.
"As the market has evolved, changing toward putting a premium on liquidity, archaic and restrictive assignment language is no longer the standard," noted one banker, adding that investors today would not sign such an agreement without receiving substantial compensation. The term loan was negotiated in March 2001.
The company also has a five-year, $750 million revolver that expires in 2005 and a 364-day, $575 million revolver due in August, which can be termed out. Goodyear has obtained waivers until March 7 to comply with covenants that would require the company to contribute almost $500 million over what is required by federal regulations to its underfunded pension funds. The waivers also cover the company's minimum net worth covenant.