Goodyear hits lows around 97¾ bid but rebounds to 99 bid by close as investors shrug off 10-K delay

By Sara Rosenberg

New York, Dec. 11 - Goodyear Tire & Rubber Co. began the day with a quick drop in levels in response to the company's after market close announcement on Wednesday that its 10-K filing would be delayed until 2004. However, the bank debt managed to shrug off the seemingly bad news and bounce back to basically unchanged levels by the end of the day.

"The U.S. term loan traded off by about half a point and then bounced back to around 99 [bid], 99½ [offered] by the end of the day," one trader said.

"At one point, around first thing today, it was 97¾ [bid], 98¾ [offered]. It was 991/4, 99¾ yesterday so it was off about ¾ on the offer and a point and a half on the bid," a second trader said, adding that the paper did end the day at the 99 bid, 99½ offered area.

"The accounting problem is probably insignificant. The only thing is that it prevents them from doing a large transaction this year. So, either they will do a small private transaction this year or they will work out an agreement with the union and come to market next year with a larger deal," the second trader said in explanation of the paper's rebound.

On Wednesday evening, Goodyear revealed that the filing of its amended 2002 Form 10-K/A with the Securities and Exchange Commission would be delayed until next year since the company is looking to first complete the review of newly identified possible improper accounting issues in Europe.

"The delay could impact the company's ability to satisfy an obligation to the United Steelworkers of America to raise $250 million in debt and $75 million in equity-linked financing by year-end," a company news release said.

Under the recently completed contract with the union, the USWA has the right to strike after going through a grievance process if Goodyear does not complete these financings by the end of the year. Discussions with the Steelworkers have already been initiated to explore mutually beneficial options that would include aggressively pursuing financing options, including capital market access, once the amended 10-K/A is filed, the news release added.

In response to the announcement, Standard & Poor's placed Goodyear's BB- corporate credit rating and other ratings on CreditWatch with negative implications on Thursday.

"The announcement raises potential accounting concerns in a Goodyear operation that has been seen as solidly profitable," said S&P credit analyst Martin King, in the rating release. "Ratings could be lowered if the investigation results in material accounting adjustments, leading to substantial financial reporting delays, or have a negative impact on the company's prospective liquidity and access to capital."

In follow-up news, SOLA International Inc. closed on its $225 million credit facility (Ba3/BB-), consisting of a $175 million six-year term loan B with an interest rate of Libor plus 250 basis points (flexed down from original pricing of Libor plus 300 basis points during syndication) and a $50 million five-year revolver, which was undrawn at closing, priced with an interest rate of Libor plus 300 basis points.

Pricing on the term loan B can drop to drop to Libor plus 225 basis points if the company's leverage falls to 1.75 times.

UBS Investment Bank and JPMorgan acted as joint lead arrangers and bookrunners on the deal, with UBS listed on the left. Union Bank of California, a participant in the company's existing credit facility, signed on as administrative agent prior to the deal's launch and in fact, was one of the only early commitments received.

Proceeds from the term loan, as well as a portion of the net proceeds of approximately $113 million from a recently completed common stock offering, were used to fund the tender offer for the company's 11% senior notes due 2008. The total consideration paid in connection with the tender was approximately $252 million. The remainder of the proceeds will be used for general corporate purposes.

The company's existing $90 million revolver was terminated in connection with these transactions.

"We are very pleased with the execution of the transactions completed over the past few weeks," said Jeremy C. Bishop, president and chief executive officer, in a company news release. "The recapitalization of SOLA, which included the sale of 6.9 million shares of our common stock and the transactions announced today, is enormously important to the company as it provides a capital structure which enables us to pursue strategic growth initiatives. As a result of this recapitalization, annual interest expense will be substantially reduced, debt decreased approximately $48 million and we significantly expanded our institutional shareholder base."

SOLA is a San Diego designer, manufacturer and global distributor of plastic and glass eyeglass lenses.

The acquisition of Roadway Corp. by Yellow Corp. for approximately $966 million plus the assumption of about $140 million in debt was completed on Thursday and the new Yellow Roadway Corp. company emerged.

In connection with this merger, Yellow Roadway obtained a new $675 million credit facility (Baa3/BBB) consisting of a $175 million term loan B with an interest rate of Libor plus 175 basis points, a $250 million prefunded letter of credit facility with an interest rate of Libor plus 175 basis points and a $250 million revolver with an interest rate of Libor plus 175 basis points.

Originally, the term loan B was priced at Libor plus 225 basis points, the prefunded letter of credit facility was priced at Libor plus 225 basis points and the revolver was priced at Libor plus 200 basis points, but all three tranches were reverse flexed during syndication.

Deutsche was the lead bank on the credit facility.

"The Roadway transaction is a significant milestone in the continuing transformation of both companies," says Bill Zollars, chairman, president and chief executive officer of Yellow Roadway, in a company news release. "Together, we have the increased scale, strong financial base and market reach needed to enhance shareholder value. We firmly believe this is the right strategy with the right partner at the right time."

Yellow Roadway is an Overland Park, Kan. less-than-truckload freight hauler.

Also Thursday, Atrium Cos., Inc. closed on its new $230 million credit facility to help finance the acquisition of the Dallas window maker by Kenner & Co., Inc., UBS Capital Americas, Merrill Lynch Global Private Equity and some members of Atrium management, including Jeff L. Hull, the president and chief executive officer of Atrium. The transaction, including escrowed proceeds of $40 million for a potential acquisition by Atrium, is valued at approximately $700 million.

The credit facility (B1/B+) was via CIBC World Markets and UBS Securities and made up of a $50 million five-year revolver at Libor plus 300 basis points and a $180 million five-year term loan B at Libor plus 275 basis points.

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