A day after Goodyear announced that an informal SEC probe into accounting irregularities within the company had turned formal, the tire-maker also said it plans to sell $650 million in bonds through a private offering in what some say is a desperate attempt to raise cash.
Goodyear is apparently in dire need of new financing, according to the Wall Street Journal, which reported the company has $1.9 billion in debt that will mature next year with another $1.3 billion maturing in 2006. The company will most likely replace most of that with longer-term debt to better position it to get its financial house in order.
Goodyear, based in Akron, Ohio, told the Journal that the $650 million in bonds is separate from a new $650 million term load the company is finalizing with banks, the Journal reported, adding that the company said it will use proceeds from the bond offering to prepay its existing U.S. term-loan facility, to reduce a portion of the commitments under its U.S. revolving credit facility and to prepay other debts.
"This is part of the financial side of our turnaround plan," Goodyear spokesman Keith Price told the Journal.
Goodyear announced a five-and-one-half year restatement of its earnings in October. The restatement announcement has spawned 32 related lawsuits.
Goodyear disclosed in a federal filing last week that the Securities and Exchange Commission switched its probe of the accounting irregularities that led to the restatement from informal to formal and added that the company's oversees operations were also under investigation, the Journal reported.