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Goodyear responds to credit downgrades

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Goodyear Tire & Rubber Co. officials say the company will have "adequate liquidity" to meet its financial obligations in the face of credit downgrades announced earlier today by Moody's Investor Services and Standard & Poor's Ratings Services.

Moody's dropped Goodyear's unsecured debt rating from B1 to Ba2 but added that "the rating outlook is stable."

In related actions, Moody's also assigned a Ba2 long-term debt rating to Goodyear's three proposed senior credit facilities totaling $3.3 billion, while assigning a senior implied rating of Ba3 and a long-term issuer rating of B1.

While Moody's applauds Goodyear's efforts to reduce its operating costs, contain capital expenditures, boost tire prices and increase its market share, "absent a marked improvement in (Goodyear's) end markets, namely the North American replacement tire market, Goodyear's profitability is likely to remain at depressed levels."

Goodyear officials say Moody's actions give the tire manufacturer's bank lenders the right to terminate its United States accounts receivable credit facility but believe "that due to on-going discussions with these lenders, (Goodyear) will continue to have access until agreements are finalized, at which time it intends to retire this facility."

Standard & Poor's has assigned BB+ and BB- ratings to the Akron, Ohio-based tiremaker's senior secured credit facilities.

"Goodyear requested that the agencies assign ratings to the credit facilities that have been proposed in our discussions," says Goodyear Executive Vice President Robert Tieken.

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