Last week, Textron Inc. reported earnings as its subsidiary, Textron Financial Corp., which services, finances and manages receivables, had a senior note transaction circulating in the private placement market.

Providence, R.I.-based Textron has historically been a periodic issuer of equipment lease and pooled aircraft lease securitizations.

Throughout the years, the company was mulling a franchise securitization, though as luck would have it, the traditional enterprise-value franchise became one of the worst performing asset classes in the ABS universe, marred with lawsuits and high-profile bankruptcies. On the aircraft side, uncertain economic conditions, not to mention the state of the industry post-September 11, has kept the company on the sidelines in recent years. Textron last brought an aircraft deal in November 2001.

However, in its earnings call last week, the company noted that its aggressive four-year restructuring program, aimed at cutting annual costs by $480 million per year, should be fully implemented in this year and economic conditions continue to improve.

According to sources, Textron Financial, a unit of Textron Inc., launched a $250 million dollar senior note deal in the private placement market this month. Set to circle at press time, sources said the transaction's agent was Merrill Lynch, and that price talk on a 10-year bullet maturity was well under 90 basis points over Treasurys, possibly as tight as 80 to 85 basis points, according to two different sources.

The unit is a diversified commercial finance company of Textron, with just over $9 billion in managed and serviced finance receivables. Textron Financial slimmed down to its core assets this year with sale in early 2004.

In January, Textron Financial sold its entire $402 million Small Business Direct portfolio to MBNA America Bank for an undisclosed amount. The SBD division provided small businesses with unsecured revolving lines of credit up to $50,000. At the time of the sale, Jay Carter, Textron Financial's CEO, noted the sale completed the disposition of roughly two-thirds of the company's non-core loans without sustaining a loss. Core businesses for the unit have been deemed as aircraft finance, asset-based lending, distribution finance, golf finance, resort finance and structured capital. Textron Financial also provides financing programs for products manufactured by parent Textron Inc.

Though Textron beat Street expectations, the company announced that net income slipped to $37 million in the first quarter from $66 million for the same quarter last year, the result of lower volumes in its aircraft business and restructuring charges. Revenues were $2.35 billion, down from $2.40 billion in first-quarter 2003. Finance segment revenues decreased $6 million, due to lower finance charges from lower average finance receivables, while profit increased $8 million, primarily due to an improved net interest margin and lower operating expenses.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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