Project Description

Tenneco Spin-off Notes

August 7, 2020 – Update

From the conference call:

Armintas Sinkevicius

Yes, that makes sense. That makes sense. Okay. And then just the last one here, I’m guessing this is isn’t top of mind at the moment given the environment, but maybe you can update us on the separation. Has that been completely put on hold for now? Any discussions at all there? Or just how you’re thinking about it here?

Brian Kesseler

Well, obviously with what we’re seeing in the market environment today and kind of the whole capital market structure as it’s been put on hold, we’re always looking at our portfolio from a strategic standpoint. In fact we had to — with a meaningful opportunity that we had — to pause it mid-flight as this pandemic hit. So we’ll be looking to pick that conversation back up at the right time. We’ve got to reestablish the margin profile and make sure we get the right value. But with our focus right now on accelerating that — accelerating cash generation and putting that to work on debt pay down and targeted investments, we think that’s — it is where we need to be concentrated to get that debt position down. But that’s going to be critical in any of the decision-making we make on any of the strategic options, including separating the businesses.

February 20, 2020 – Update

From the conference call:

Armintas Sinkevicius

When I look at the leverage exiting 2019 at about 3.6 and I look at your guide for 2020, adding the free cash flow that you plan to generate in 2020 and in backing out some of the restructuring costs from that. It gets about 3.6 leverage by the end of 2020 and I’m just wondering with you targeting three times leverage for the spin. Is the spin still on track for this year or when do you anticipate that intermediate term to get three times leverage in order to be able to execute on this spin?

Brian Kesseler

Well couple points, we exited the year at 3.5 times.

Armintas Sinkevicius

Right.

Brian Kesseler

And we’ve got the range in our EBITDA for a reason. We’re going to continue to go to work and offset as much of this Coronavirus impact that we can without – with not counting on any of it coming back. So, we’re obviously going to be always driving to the business to get to more of a top end of that range, but it’s very uncertain at this point in time. To peg a, we’re not pegging a data on the spend because as you can imagine several variables that we consider. Sale of a particular product line or a couple different product lines come together and we move our leverage down then under three is where we open up the window for the consideration, once we get to that mark. We’ll be looking at the end markets we’re serving to see how stable they are, we will have to refinance the DriV sides.

We want to make sure the financing markets are conducive to an affordable structure there. But I’ll reiterate, the only reason we’re not already separated. We’ve solved all the variables from an execution, operational side is making sure that the two businesses have the right capital structure coming out of the gate to operate the way they need to. So, we’re not putting any specific timeline on a spin because there is a lot of variables come in there, that can improve that or depending on end market performance could get a little – push it out a little bit.

So, we’re intently focused on executing the business. Making sure we’re being very deliberate and disciplined on the strategic alternatives and as the opportunities present themselves, we’ll – that maximize shareholder value we’ll execute on.

 

 

May 10, 2019 – Update

“The expected spinoff of DRiV is now delayed from a second half of 2019 timeframe previously to mid-2020 as both companies work to stabilize business practices, improve margins, cash flow performance and balance sheet health,” KeyBanc Capital Markets analyst James Picariello wrote in a note to clients. “While we understand the caution surrounding the DRiV spin, we are surprised by the delay this close to the expected spin and the extent of Ride Performance’s operational struggles,” the analyst added.

April 10, 2018 – Update

  • On April 10, 2018 Tenneco (TEN) announced that it intended to acquire Federal-Mogul from Icahn Enterprises with plans to then create two public, independent companies through a tax-free spin-off.
  • The total transaction value of the acquisition, completed October 1, 2018, was $5.4BN funded through cash, Tenneco equity and assumption of debt.
  • The spin-off, expected to take place in the back half of 2019, will establish an aftermarket & ride performance company, as well as powertrain technology company.