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Textron Financial...

December 23, 2008 – Comments (1) | RELATED TICKERS: TXT , PHHM

Textron Announces Plan to Exit All Non-Captive Financial Businesses; Revises Fourth Quarter Financial Outlook and Expands Restructuring Program

PROVIDENCE, R.I.--(BUSINESS WIRE)--Textron Inc. (NYSE:TXT) today announced that its Board of Directors has approved a plan to exit all of Textron Financial Corporation’s (TFC) commercial finance business through a combination of orderly liquidation and selected sales, other than that portion of the business supporting the financing of customer purchases of Textron-manufactured products.

The company previously indicated that TFC would be exiting its Asset Based Lending and Structured Capital segments, as well as several additional product lines, representing about $2 billion in managed receivables. The revised plan now applies to approximately $7.9 billion of TFC’s $11.4 billion managed receivable portfolio.

The company has also extended the revolving period for its $550 million aircraft finance securitization facility, so that it will remain available through December 2009 to finance new receivables as existing receivables are repaid.

Textron Chairman, President and CEO Lewis B. Campbell commented, “Executing this new strategic direction for TFC is expected to significantly enhance our long-term liquidity position in light of continuing disruption and instability in the capital markets.”

Approximately $3.5 billion of the liquidating receivables are now designated for sale or transfer, of which about $1.3 billion are securitized receivables managed by TFC and $2.2 billion are owned assets classified as held for sale. Accordingly, Textron will record an approximate $250 - $300 million pre-tax fourth quarter, mark-to-market adjustment against owned assets held for sale, as noted above. Because the exit plan also creates a change in investment status of TFC’s Canadian subsidiary, the company will also recognize non-cash tax charges of about $31 million. These adjustments are in addition to the previously announced $169 million non-cash, pre-tax impairment charge to eliminate TFC’s goodwill.

Also, as a result of continued market stress and the impact of the exit plan, Textron intends to increase TFC’s reserves in the quarter, which is expected to result in a fourth quarter pre-tax segment loss in Finance of about $130 million.

Segment profit (loss) is an important measure used for evaluating performance and for decision-making purposes. The measurement for the Finance segment excludes restructuring charges and certain other charges, such as initial mark-to-market adjustments upon the change in investment classification and goodwill impairment charges.

In order to remain compliant with its support obligations to TFC, Textron plans to make an approximate $600 million capital contribution to TFC during the fourth quarter of 2008. This amount is based on the additional losses and charges described above and is in lieu of the estimated $200 million the company previously indicated it would contribute in the first quarter of 2009. The contribution will not result in any increase in the consolidated amount of Textron and TFC debt outstanding.

Wow....I couldn't have timed that better if I tried. See my recent post about Palm Harbor Homes and Textron