Moody's rates Goodyear loan B1

Moody's Investors Service said it assigned a B1 rating to the proposed $500 million senior secured funded credit facility of Goodyear Tire & Rubber Co.

The facility will replace Goodyear's existing senior secured $680 million U.S. bank revolving credit and will succeed to that facility's collateral package and guarantee structure.

When closed the facility will assist Goodyear's refinancing of its 2005 maturities (the current revolver would expire in April 2005) and will satisfy the agreement with the USWA union. The letter-of-credit capacity under the facility covers all currently issued letters of credit under the U.S. bank revolver.

Moody's said the lengthened commitment also helps Goodyear's liquidity position by preserving availability under its asset-backed revolver ($500 million), as well as reducing the potential requirement to post cash collateral for letters of credit. While Goodyear's first quarter results and its recent preview of the second quarter present encouraging trends, particularly in North American Tire, the company still faces ongoing challenges. These include restoring and maintaining profitability, generating adequate free cash flow from its operations (after required pension plan contributions), and strengthening its capital structure.

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