CNH Global works off debt

News AED March 13, 2003
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CNH Global N


CNH Global N.V. has announced its board of directors has approved plans to reduce the company's net debt by $2 billion through the issuance of convertible perpetual preferred securities to a financial affiliate of CNH's majority shareholder, Fiat S.p.A. The company expects to use the proceeds of the transaction to repay equipment operations indebtedness owed to Fiat Group companies.

The immediate benefits to CNH are expected to be substantial. The securities will carry an annual dividend rate of 0% until Jan. 1, 2005. From that date, the annual dividend will be fixed at the dividend yield on the company's common shares, plus an additional 150 basis points should the company achieve certain financial performance targets.

By retiring $2 billion of equipment operations debt coming through 2005, CNH gains ample financial liquidity. Of the total debt being repaid, $1.3 billion matures in 2003. On a Dec. 31, 2002 pro forma basis, equipment operations net debt will drop to a level of about $1.5 billion. The company's net debt-to-capitalization ratio will drop from 56% to 24%. Interest expense should be reduced by nearly $100 million on an annual pretax basis.

Concurrent with the issuance of preferred securities to Fiat, CNH will implement a 1-for-5 reverse split of the company's common stock. Both transactions are expected to be effective in early April 2003.


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