Toledo-based Owens Illinois, Inc., said yesterday that its crucial $4.5 billion in bank loans and credit lines has been renewed through March, 2004, but the company will pay a higher interest rate because of its unresolved asbestos liability.
Under financing terms provided by an 81-bank syndicate that has provided O-I with credit, the Fortune 500 firm will receive a $3 billion revolving credit line and a $1.5 billion term loan.
Interest on the new financing would add $61.9 million in interest expenses if O-I uses the entire $4.5 billion loan and revolving credit line. The new interest rate is 1.375 percentage points higher than the last one.
``It reflects the current credit market for any company that has an asbestos liability right now,'' said spokesman John Hoff
O-I plans to use $490 million from the previously announced sale of its Harbor Capital Advisors mutual-fund businesses to pay down the term loan. The Harbor sale is expected to close in June. The new credit line will be used to pay off the last one, which was to expire Dec. 31.
Some financial analysts speculated that O-I might be able to secure it or would have to pay substantially more for it because of its asbestos-liability problems. Without it, the analysts said, the Toledo manufacturer of beer bottles and other containers might be headed to Chapter 11 bankruptcy.
Lenders had become nervous about O-I's financial situation after the U.S. economy began to deteriorate and other former asbestos producers, including Toledo's Owens Corning, filed for Chapter 11 last year. O-I in 2000 paid $181 million to 21,000 construction workers and others who became ill from breathing the dust of asbestos insulation made by the firm in the 1940s and 1950s, a report shows.
The company has insisted its asbestos claims are not a huge problem, but financial analysts have questioned whether the firm might face soaring claims as one of the few asbestos makers not in bankruptcy and thus with deep financial pockets.
To secure the new financing, the firm had to use its domestic plants and equipment and some of its foreign subsidiaries as collateral as well as accept the higher interest rate. Deutsche Banc Alex. Brown was the main arranger of the new financing.
``The good news is that it means will be operating for the next three years,” Mr. Hoff said.