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Merrill Downgrades Goodyear Tire to 'Sell'


Merrill Lynch downgraded Goodyear Tire & Rubber (GT) to sell.

Goodyear says it will eliminate its dividend to raise cash, and is talking with its banks and hopes to boost its financial flexibility by modifying some of its loan agreements. Analyst John Casesa estimates that during 2003 and 2004, Goodyear faced about $1.9 billion in cash calls for debt maturities, pension contributions, and put options.

Casesa says the company is dependent on its banks' willingness to continue to extend its credit and help it to refinance its obligations. At present, Goodyear does not have a wide margin of error before it butts up against its covenants, he adds.

Casesa says a breach could require the company to come up with cash earlier than expected, or make refinancing either more difficult or very expensive.

Goodyear's shares have fallen more than 45% percent since the beginning of the year.


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