With its stock price at a 52-week low of $3.67 a share as of the close of the New York Stock Exchange yesterday, Goodyear Tire & Rubber Co. announced it is "engaged in meetings with representatives of its principal bank lenders about modifying certain loan
agreements, including covenants within those agreements."
Here's what Goodyear said in an official news release announcing a plan to enhance its financial flexibility:
"The successful completion of these actions, accompanied by steps we have taken to enhance our revenue, improve our cost structure, preserve cash and strengthen our balance sheet, should provide us the financial resources,
including access to capital markets, to meet the ongoing needs of our business
and drive our turnaround," said Robert J. Keegan, Goodyear president and chief
executive officer.
The lenders have granted Goodyear waivers until March 7 to comply with certain covenants that would have required the company to contribute
approximately $500 million to its pension plans in excess of federally mandated requirements. The covenants also would have required the company to maintain a minimum net worth, which could be impacted by non-cash adjustments
for minimum pension provisions and/or a valuation allowance related to domestic deferred tax assets.
Under the waivers, Goodyear has full access to approximately $1.1 billion in two revolving credit facilities. In addition to these facilities, at the end of January, Goodyear had more than $600 million in cash on hand. Goodyear
also has approximately $300 million in other committed and $400 million in uncommitted lines of credit available as of December 31, 2002.
Additionally, the company said that its domestic accounts receivable facility was amended in December 2002 and extended until December 2003 by a group of four banks. The program had been set to expire in February 2003.
Among the amended terms was a change in the minimum credit rating requirement to BB-/Ba3 and the size was adjusted to $700 million. The company also has international accounts receivable facilities totaling approximately
$400 million.
"We look forward to completing the review of our business and financial plans with our banks. We believe with these plans we can and will successfully meet the current challenges in our business, build on our continuing strengths and bring Goodyear to improved levels of operational and financial performance,"
Keegan said.
The company said that it will release its 2002 financial results following the conclusion of its bank discussions.
