Goodyear firms on completion of investigation

By Paul A. Harris

St. Louis, April 12 - A quiet Monday session in the leveraged loan market saw the bank debt of Goodyear Tire & Rubber firm on word that the investigation into its overseas accounting had come to a close.

The news, capital markets sources said, could have been worse.

In a Monday press release Goodyear stated that it expects the reduction to net income between 1997 and 2003 identified through the investigation will total approximately $10 million, with most of it impacting the company's European Union business.

"This investigative process was thorough and we are pleased to have it behind us," said Robert W. Tieken, Goodyear executive vice president and chief financial officer, in a press release. "We look forward to issuing our financial results and refocusing all of our energies toward Goodyear's ongoing turnaround efforts."

The accounting investigation was requested by the company's audit committee and announced on Dec. 10, 2003. On Feb. 11, the company said it was extending the investigation from Europe to other overseas operations. On March 9, Goodyear reported that it took disciplinary actions against several senior managers in its European Union operation in connection with the investigation.

The company also has identified additional adjustments to those previously disclosed in its Sept. 30, 2003 Form 10-Q that are expected to result in a reduction in net income of approximately $65 million between 1997 and 2003.

The adjustments include $20 million related to workers' compensation claims, $10 million to the aforementioned investigation, $10 million to fixed assets, $8 million to product liability, $7 million to inter-company profit elimination in inventory and $10 million to other items.

Because the company will not file its 2003 Form 10-K by April 19, as required in its loan agreements, Goodyear said it is in discussions with lenders to extend the deadline by 30 days. While Goodyear does not expect to need to access the facilities during this 30-day period, in the absence of an extension, the company would not be able to access them. In that case, it would have until May 19 to file financials and regain access. If Goodyear does not file financials by May 19, there could be an event of default under the loan agreements and thereafter under other debt instruments.

One trader told Prospect News on Monday that Goodyear's bank debt had firmed "a point or so," on the news. Another leveraged loan market source concurred that Goodyear's bank debt firmed on the news.

Monday quiet as market looks ahead

Sources reported a dead quiet session on Monday, with players possibly extending their post-holiday hiatuses.

However the market anticipates no fewer than four bank meetings during the remaining four sessions of the April 12 week.

A Tuesday bank meeting is scheduled for Maidenform Inc.'s $180 million credit facility via BNP Paribas. The facility is comprised of a $30 million revolver, a $90 million first lien term loan talked at Libor plus 375 basis points and a $60 million second lien term loan talked at Libor plus 650 basis points.

Meanwhile three bank meetings are heard to be scheduled for the mid-week session.

On Wednesday in Las Vegas, Boyd Gaming Inc. will hold the bank meeting for its $1.5 billion credit facility (expected ratings Ba1/BB+) via Bank of America and CIBC. The deal is comprised of a $1 billion revolver and a $500 million term loan B talked at Libor plus 200 basis points area.

Also on Wednesday The Holmes Group Inc. will hold the bank meeting for its $420 million credit facility, with General Electric Capital Corp. and Credit Suisse First Boston serving as joint lead arrangers and bookrunners. The deal includes a $75 million five-year revolver at Libor plus 325 basis points, with a 50 basis points commitment fee, a $240 million first lien term loan at Libor plus 325 basis points, and a $105 million seven-year second lien term loan at Libor plus 700 basis points.

And Juno Lighting Inc. will hold its bank meeting Wednesday for its $210 million credit facility, via Wachovia. The deal is comprised of a $150 million first lien term loan at Libor plus 300 basis points and a $60 million second lien term loan at Libor plus 575 basis points.

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