Textron Draws Down Credit Lines

In a move it calls "prudent. . .in the current environment," Textron draws down its remaining $3 billion in bank lines.

Textron Inc. said it has drawn the balance of its $3 billion committed bank credit lines available to the company and its commercial finance subsidiary, Textron Financial Corp. (TFC).

After it repays all commercial paper outstanding, reportedly valued at $1.8 billion, the company said it will use the remaining $1.2 billion for added cash liquidity.

The maker of Cessna jets and Bell helicopters added that the amounts borrowed under the credit lines will not need to be repaid until April of 2012.

“Today’s actions are consistent with the comprehensive liquidity plan outlined in our earnings call, and we believe the additional liquidity puts Textron and TFC in a strong position for 2009 and beyond,” said Textron Chairman and CEO Lewis B. Campbell. “It is prudent to ensure cash liquidity in the current environment, and the bank credit lines provide such liquidity at very attractive terms. This liquidity strengthens Textron and will put TFC in a stronger position as it executes its downsizing strategy.”

The company said that its liquidity plan includes the liquidation of non-captive finance receivables, asset sales at TFC, new TFC securitizations or securitization extensions, capital market alternatives, Textron asset sales and cash generated by manufacturing operations.

The stock Wednesday shed nearly one-quarter of its total market capitalization.

In response to Textron’s announcement, Standard & Poor’s lowered its rating on the stock to “Sell.” While S&P sees Textron’s plan to meet its obligations in 2009 as achievable, it said the plan’s success is dependent on realizing a significant part of planned finance-division asset sales and receivables liquidations, which S&P called “a risk.”

S&P cut its 2009 earnings estimate for the Textron by more than half and halved its price target “on liquidity risk.”

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