Fitch rates Goodyear notes B

Fitch Ratings said it assigned a rating of B with a recovery rating of RR5 to the Goodyear Tire & Rubber Co.'s proposed issuance of $700 million of new senior unsecured notes due 2022.

The company's issuer default rating is B+.

The outlook is stable.

The recovery rating of RR5 on the proposed notes reflects estimated recovery prospects in the 10% to 30% range in a distressed scenario.

The proposed notes rank pari passu with the company's existing senior unsecured notes and are guaranteed on a senior unsecured basis by the company's same U.S. and Canadian subsidiaries that guarantee its secured bank credit facilities and existing senior unsecured notes, Fitch said.

The proceeds will be used to redeem the company's $650 million of 10½% senior unsecured notes due 2016.

Although the proposed notes will increase the company's debt outstanding by $50 million, it will move the company's note maturities further into the future and will presumably reduce the company's cash interest expense, given the high coupon on the 2016 notes, the agency said.

Following the redemption of the 2016 notes, the consolidated company will have no note maturities until 2019, when the €250 million of 6¾% senior unsecured notes issued by the company's Goodyear Dunlop Tires Europe BV subsidiary come due.

Goodyear does, however, have several significant bank debt maturities before then, including its $1.2 billion second-lien term loan, which matures in 2014, the agency said.

The ratings reflect the company's strong competitive position as a leading brand in the global replacement and original equipment tire segments and ongoing market acceptance its premium tire offerings, Fitch said, set against a backdrop of a persistently negative free cash flow performance and substantially underfunded pension obligations.

© 2015 Prospect News.
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