A realignment of Tenneco's European ownership structure will advance the company's financial strategy and more effectively align U.S. and European assets and revenues with liabilities and expenses in the appropriate local currencies, the company recently announced.
Tenneco has formed a Luxembourg holding corporation, which has become the owner of certain key European entities. The realignment will also provide opportunities to reduce the company's cash taxes by about $4 million annually and allow Tenneco to accelerate the use of its U.S. net operating losses.
The realignment of the European ownership structure is another step in Tenneco's financial strategy toward earning an investment grade debt rating. On Nov. 30, 2007, the company successfully completed the refinancing of a portion of its 10 1/4 percent senior secured notes, due in 2013, with 8-1/8 percent senior unsecured notes due in 2015. This refinancing reduces interest expense by approximately $3 million annually. The subsequent European ownership structure realignment will allow Tenneco to shift a portion of its debt to Europe, which will better match the company's liabilities and expenses with its European assets and revenue.
"We are very pleased to complete these transactions, which represent strategic steps in our transition from a highly leveraged company to achieving an investment grade rating. This European structure change allows us to more appropriately apportion our debt," says Gregg Sherrill, Tenneco's chairman and CEO. "Completing the refinancing in such a tough financing environment reflects investor confidence in Tenneco's financial position and long-term growth potential. Tenneco is well-positioned to generate significant growth in our emissions control business over the next five years, and beyond, as vehicle emissions standards tighten worldwide."
The company's European operations have significantly improved since the original debt structure was established when the company became independent in 1999. The European revenue growth and improved profitability give the company more flexibility to better align its debt with its operations. Tenneco expects to record non-cash income tax charges of $66 million in fourth quarter 2007 related to the realignment, which will generate U.S. taxable income and utilize a portion of the U.S. net operating losses.
For more information about Tenneco, visit the company's Web site.