Fitch lifts Goodyear outlook to positive

Fitch Ratings said it revised the outlook for the Goodyear Tire & Rubber Co. to positive from stable and affirmed the company's issuer default rating at B, $1.5 billion first-lien credit facility and $1.2 billion second-lien term loan at BB/RR1, $300 million third-lien term loan and $650 million third-lien senior secured notes at B/RR4 and senior unsecured debt at CCC+/RR6.

Goodyear Dunlop Tires Europe BV's €505 million European secured credit facilities were affirmed at BB/RR1.

The outlook revision follows Goodyear's announcement in March that it reached an agreement to sell its engineered products business for $1.475 billion. The company has indicated that it will use part of the proceeds to reduce debt, although specific plans have not yet been announced, and that it may consider issuing equity to further support its long-term plan to reduce leverage.

The agency said an eventual upgrade of Goodyear's ratings would be dependent on the amount of debt paid down, improvement in demand for replacement tires in North America and the company's ability to realize anticipated improvements in its cost structure, particularly in North America.

Rating concerns include raw material costs, competitive pricing in certain international markets and substantial cash requirements for capital expenditures, pension contributions and working capital requirements to rebuild inventory following the labor strike that was resolved at the end of 2006, Fitch said.

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