AKRON, OH - Goodyear Tire & Rubber Co. (NASDAQ:GT) has entered into a material definitive agreement securing a new $500 million credit facility, according to a recent 8-K filing with the Securities and Exchange Commission. The credit agreement, signed on Monday, is with Goldman Sachs (NYSE:GS) Bank USA and possibly other lenders.
This senior unsecured credit facility is set for a term of 364 days and is earmarked exclusively for the redemption of Goodyear's 9.500% Senior Notes due in 2025. Currently, there is an outstanding amount of $800 million in aggregate principal of these notes, which is expected to be reduced to $500 million following a partial redemption.
In a related move, Goodyear announced today that it is calling for the redemption of $300 million in aggregate principal amount of the outstanding notes on August 7, 2024. The redemption price is slated to be 100% of the principal amount plus accrued and unpaid interest up to the redemption date.
This strategic financial maneuvering comes as Goodyear aims to manage its debt and reduce interest expenses. The company has agreed to pay customary fees and expenses to Goldman Sachs and any other lenders for the establishment of this credit facility.
In other recent news, Yokohama Rubber Co. is reportedly in talks to acquire the off-road tire division of Goodyear Tire & Rubber Co. for a sum that could exceed $1 billion. This strategic expansion aims to enhance Yokohama Rubber's presence in the off-road tire market, marking a significant consolidation in the global tire manufacturing industry.
Morgan Stanley (NYSE:MS) has initiated coverage of Goodyear Tire & Rubber Co. with an Equalweight rating, setting a price target of $14.00 for the company's shares. This rating suggests that the stock is expected to perform in line with the average return of the stocks that Morgan Stanley covers over the next 12 to 18 months.
Goodyear reported a strong first quarter in 2024, with segment operating income reaching $247 million, nearly double from the previous year. This performance was primarily driven by recovery in the Americas and growth in the Asia Pacific region. The company's net debt also saw a significant reduction, decreasing by over $550 million compared to the previous year.
As part of its Goodyear Forward plan, the company is targeting $1.3 billion in earnings improvement and a 10% segment operating income margin by the end of next year. In terms of future expectations, Goodyear projects steady volume and pricing in the second half of the year, with anticipated growth in the Americas and restocking in EMEA.
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