Moody's cuts Goodyear to SGL-3, view to negative

Moody's Investors Service said it changed Goodyear Tire & Rubber Co.'s outlook to negative from stable and downgraded the speculative grade liquidity rating to SGL-3 from SGL-2.

The agency also affirmed the company's B1 corporate family and probability-of-default ratings; Ba1 first-lien credit facility (LGD2, 10%); Ba3 second-lien term loan (LGD3, 35%); B2 third-lien secured term loan, 11% senior secured notes, floating-rate senior secured notes and 9% senior notes (LGD4, 63%); B3 remaining senior notes and senior unsecured convertible notes (LGD6, 94%); and Goodyear Dunlop Tyres Europe's Ba1 credit facilities (LGD2, 10%).

The downgrade and negative outlook reflect the increased operating uncertainty arising from the ongoing United Steelworkers strike at Goodyear's North American facilities and the company's decision to increase cash on hand by drawing down $975 million under its domestic revolving credit facility, Moody's said.

In the short term, the extraordinary borrowing confirms liquid resources at the company's disposal, but does so by increasing gross leverage and carrying costs while labor negotiations in its critical North American market remain unresolved. In Moody's view, the decision to draw under the credit facility may reflect the extent of the gap between the company and the union and the time frame in which a conclusion might be reached.

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