LAKE FOREST, IL -- Tenneco Automotive (NYSE: TEN) has agreed with its senior lenders to amend certain terms of its senior credit facility in order to revise the financial covenant ratios under the facility in each quarter of 2001. Under the revised plan, Tenneco Automotive will retain access to its $500 million revolving credit facility, subject to compliance with the revised financial covenant ratios among other terms.
The company is required to meet three financial ratios under its senior credit agreement: a maximum leverage ratio (total debt/EBITDA), a minimum interest coverage ratio (EBITDA/cash interest payments), and a minimum fixed charge coverage ratio (EBITDA - capital expenditures/cash interest payments).
For the first quarter of 2001, the maximum leverage ratio was increased from 4.75 to 6; the minimum interest coverage ratio was reduced from 1.7 to 1.4; and the minimum fixed charge coverage ratio was reduced from 0.75 to 0.60.
CFO Mark McCollum said he is pleased with the approval from Tenneco Automotive's senior lenders, showing support for the company's strategies to address challenges, as well as its longer-term plans to grow the businesses. "We are aggressively reducing costs and spending, and working to improve our productivity as we continue to face very tough industry conditions -- a soft worldwide aftermarket, and slower production in the North American light vehicle and heavy-duty truck markets," McCollum added.
This all follows a series of less-than-encouraging news that Tenneco Automotive delivered early in the year. First, on Jan 25, the company announced that it expected 2000 earnings would be lower than consensus analyst estimates due primarily to difficult industry and market conditions. On Jan. 31, the company cut 215 jobs and announced plans to eliminate as many as 190 more salaried positions worldwide by the end of the 2002 first quarter. It should be noted that this action was in addition to cost-reduction plans announced by the company in October 2000 that included eliminating up to 700 salaried positions worldwide by the end of 2001.
All totaled, Tenneco Automotive would have reduced its worldwide salaried workforce by 22 percent.
On Feb. 6, the company reported a fourth quarter loss from continuing operations of $63 million, or $1.74 per diluted share, which included restructuring and other charges of $42 million after-tax, or $1.18 per share. Wall Street analysts had predicted Tenneco Automotive would post a fourth quarter loss per share of $0.33. Before charges, the company reported a loss from continuing operations of $21 million, or $0.56 per diluted share, compared with income of $1 million, or $0.05 per diluted share in the fourth quarter of 1999.
For the full year 2000, Tenneco Automotive reported a loss from continuing operations of $41 million, or $1.18 per diluted share, which is down from a loss from continuing operations of $63 million, or $1.87 per diluted share in 1999. According to Zacks Investment Research, analysts had forecast that Tenneco Automotive would post full-year earnings of $0.39 for 2000. This figure was adjusted after Tenneco Automotive announced on Jan. 25 that it expected 2000 earnings results would be lower than consensus analyst estimates.
One day after Tenneco Automotive posted its fourth quarter and full year results, Credit Lyonnais downgraded its recommendation on Tenneco Automotive from "buy" to "hold."