Fitch rates Goodyear notes BB

Fitch Ratings said it assigned a rating of BB with recovery rating of RR4 to the Goodyear Tire & Rubber Co.'s proposed issuance of $700 million in senior unsecured notes due 2027.

The company’s issuer default rating is BB and the outlook is stable.

The proposed notes will be guaranteed on a senior unsecured basis by the company’s U.S.- and Canadian-subsidiaries, which also guarantee Goodyear’s secured credit facilities and its other senior unsecured notes, Fitch said.

The proceeds will be used to redeem Goodyear’s existing $700 million of 7% senior unsecured notes due 2022, the agency said.

By refinancing the 7% notes, Goodyear will likely be able to take advantage of favorable credit market conditions to lower its cost of debt, while shifting maturities further into the future, Fitch said.

The RR4 recovery rating indicates 30% to 50% expected default recovery.

The ratings reflect the tire manufacturer's strengthened credit profile, driven by significantly improved profitability and free cash flow that the company has used to reduce debt, the agency said.

The company’s focus on high value-added tires and its global cost reduction initiatives have resulted in substantial margin growth and higher operating income over the past couple of years, even as global tire volume growth has been sluggish, Fitch said.

Ratings concerns include heavy competition in the global tire industry, rising industry capacity and the industry's sensitivity to commodity prices, the agency said.

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