Moody's rates Goodyear note B2

Moody's Investors Service said it assigned a B2 rating with a loss-given-default assessment of LGD4 (63%) to Goodyear Tire & Rubber Co.'s new $1 billion offering of unsecured notes, revised the company's speculative grade liquidity rating to SGL-2 from SGL-3 and affirmed the company's corporate family rating at B1.

The new unsecured notes will consist of a $500 million floating-rate issue due 2009 and a $500 million fixed-rate issue due 2011. Both issues will benefit from upstreamed guarantees from Goodyear's material North American subsidiaries.

The outlook is negative.

Goodyear will use $515 million of the proceeds to repay $215 million of debt maturing in December and $300 million of debt maturing in March, with the balance retained for general corporate purposes.

The agency said the revision of the speculative grade liquidity rating reflects the company's strengthen liquidity profile following the new financing as it works to resolve the strike affecting its U.S. production capacity and the B1 corporate family rating recognizes the company's substantial scale, global brands, leading market share, diversified geographic markets and improved debt maturity profile.

However, the rating also considers Goodyear's relatively weak quantitative scores, including leverage that has increased further from recent borrowings, low EBIT returns and a weak ratio of free cash flow to debt, the agency said. The company also faces challenges in restoring its balance sheet, resolving its U.S. organized labor contract and contending with various contingent liabilities.

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