Lear Gets Loan, Cuts Dividend

It will refinance $400 million of debt due next year.
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Lear Corp.

(LEA) - Get Report

, struggling to keep its head above water as the U.S. auto industry contracts, struck an agreement to refinance a chunk of debt coming due next year and said it was suspending its quarterly dividend.

The Michigan car-seat maker got $800 million of term loans from three lenders, half of which will be used to refinance debt that was due to mature in February 2007. The rest of the money will go to retiring Lear's outstanding convertible senior notes and for general corporate purposes.

"The senior leadership of Lear understands that near-term challenges within the automotive sector are weighing heavily on investors' minds," Lear said. "By refinancing our 2007 debt maturities early, investors can be assured that the company is financially sound and focused on improving our longer-term operating performance."

Gone is the company's $1 annual dividend, a step the company said was necessary to provide additional measures of liquidity in the current environment. "While we regret having to suspend the dividend program, management is focused on preserving the company's financial flexibility in a very challenging industry environment."

The company also said it was putting its European interior products operations into a joint venture that it shares with WL Ross & Co and Franklin Mutual Advisers. Lear will retain a 34% equity stake in the venture. It didn't say how much it will raise from the move.

The stock rose 15 cents, or 0.9%, to $17.10 early Wednesday.