Textron Goes Divestiture Happy, Rumored To Be Selling Industrials Business

Feb.27.09 | About: Textron Inc (TXT)

Rumor of the night, as reported by our friends at Debtwire, is that everyone's favorite private jet company Textron (NYSE:TXT), which we brought to people's attention before anyone cared about it, has hired former Masters, now merely Janitors, of the Universe, Goldman Sachs, and makers of fine, fine left bank Burgundy, Rothschild to sell the businesses that make up TXT's industrial division. Textron has gotten caught in a perfect operational storm as its main products are Cessna private jets which nobody will touch with a 10 foot pole for years, military choppers and unmanned planes (alas the recent U.S. budget has eliminated all military expenditures in favor of outright acquisitions of AIG's "assets"), golf carts (yeah...no comment there) and on top of it all it owns a captive finance business (think GECC) which finances assorted purchases on behalf of its customers.

The reason for what will soon morph into a firesale of assets, is to satisfy the cash black hole caused by Textron's captive finance business, Textron Financial (CDS at 25 pts upfront), which according to Moody's will likely be the source of a liquidity crisis in Q4 unless sold earlier. The problem is that nobody in their right mind will want to have anything to do with Textron Financial, unless the government somehow decides its should "assume" this "asset" as well... However with the populist backlash against private jets, it would seem that the Obama administration is merely buying the vehicle to finance congressmen's "fact finding" missions and as such this idea would likely not fly (plus we are sure Frank and Dodd will somehow end up being very conflicted on the purchase).

Textron, which is the most risky company of the IG11 index (it is certain to get booted at the roll to IG12), is thus stuck in a unenviable place and Goldman and Rothschild will really have to work their magic to save this company before it is too late.

Disclosure: None