Oct 24 Embattled U.S. truck and engine maker
Navistar International Corporation said it would sell 10
million common shares to the public to raise about $190 million
to fund capital expenditure and other initiatives.
The offering represents about 15 percent of the total
outstanding shares of the company before new shares are issued.
The company's share price, however, did not see any steep
fall on the New York Stock Exchange on Wednesday, indicating the
offering is seen as a positive for Navistar. They were down
about 3 percent at $18.97 in afternoon trading.
The shares have lost nearly half of their value since
January as the company has struggled to win U.S. regulatory
approval for its diesel engine technology. It ended the effort
in July and chose to adopt the engine technology used by rivals
such as Paccar Inc and Volvo AB.
To deal with the uncertainty, Navistar has embarked on a
cost-cutting program and is considering asset sales under its
new chief executive Lewis Campbell, who replaced Dan Ustian in
August. It expects to save about $175 million in fiscal 2013.
David Leiker, an analyst at Robert W. Baird & Co, said the
proceeds of the offering could provide the truck maker with "a
cushion to liquidity" in the event of a severe downturn in
demand. At the end of July, Navistar had cash and equivalents of
"The obvious question is whether the offering is an
indication of stress, or a prudent plan to get ahead of
liquidity concerns," Rob Wertheimer, an analyst with Vertical
Research Partners, said in a note to clients on Wednesday.
Navistar had said in September it would have had a loss of
$100 million in the latest quarter without a one-time gain
related to its tax rate.
Wertheimer said CEO Campbell was being cautious in light of
his experience at industrial company Textron that he led
from 1998 through 2009.
"At Textron, the company did not raise equity into the
worsening environment and then became very vulnerable when the
business unraveled more severely than expected," he said.
"Here the CEO seems to be arguing for an extra layer of
In a regulatory filing on Wednesday, Navistar also said it
expects warranty charges of $60 million to $75 million in the
fourth quarter related to higher-than-expected repair costs for
its 2007 and 2010 emission standard engines.
J.P. Morgan Securities, Goldman Sachs, BofA Merrill Lynch
and Credit Suisse Securities are acting as joint book-running
managers for the offering. The company said it would give
underwriters 30 days to purchase up to about 1.5 million shares.