Goodyear says possible equity offering would help bring down debt to target levels

By Jennifer Lanning Drey

Portland, Ore., Feb. 16 - Goodyear Tire & Rubber Co. believes a potential equity offering combined with the sale of its engineered products division would allow the company to reduce debt to levels consistent with its goal of achieving a 2.5x debt-to-EBITDA ratio, Robert J. Keegan, Goodyear's chief executive officer, said Friday during the company's fourth quarter earnings conference call.

In a form 10-K also filed Friday with the Securities and Exchange Commission, Goodyear said it plans to undertake financing actions that could include restructuring bank debt or a capital markets transaction, possibly including the issuance of new equity.

Although he did not provide further details during the call on the timing or scope of a possible transaction, Keegan did elaborate on the company's rationale for considering an equity offering to lower debt.

"We need a balance sheet that provides us with reliable access to capital throughout the economic cycle. This is a critical competitive issue for us given that we have competitors who are investment grade and therefore have this capital access today," Keegan said.

"Achieving this position is something we need to do sooner than later. We believe it would be inappropriate to take the risk of an economic downturn or another external factor preventing us from driving our future performance when we can take immediate steps to ensure our performance."

Keegan also said the company believes raising additional equity capital is in the interest of shareholders because it would facilitate the ability to drive greater value in the business going forward.

Goodyear ended 2006 with total debt of $7.2 billion, which reflected nearly $1 billion drawn under the company's revolving credit facilities, as well as a $1 billion senior notes offering completed during the fourth quarter, according to Goodyear chief financial officer Richard J. Kramer.

The company repaid all remaining borrowings under the revolver in January, Kramer added.

Goodyear is in the midst of a restructuring effort focused on increasing core business and top-line growth as well as creating an improved cost structure and stronger balance sheet.

The company reported sales of nearly $5 billion for the fourth quarter, demonstrating a 2% increase over the 2005 quarter, according to a company news release.

Goodyear is an Akron, Ohio-based manufacturer of tires, engineered rubber products and chemicals.

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