E-Z-GO 2008 Annual Report Download - page 21

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Item 1A. Risk Factors
affecting the value, and/or marketability of our assets, which could result in changes in the classification of assets we intend to hold for
investment and additional mark-to-market adjustments. We may incur higher costs than anticipated as a result of this exit plan or be subject to
claims made by third parties, and the exit plan may result in exacerbated credit losses. Moreover, our withdrawal from these lines of business will
reduce the income and cash flow that our Finance segment generates in future years. Our failure to accomplish the exit plan successfully could
result in continuing or increased adverse effects on our financial condition and results of operations.
Current levels of credit market volatility are unprecedented, which may continue to disrupt our access (including our Finance
group’s access) to the capital markets, and other sources of liquidity may not be available.
Due to unprecedented levels of volatility and disruption in the credit markets beginning in the second half of 2008, we have experienced difficulty
in accessing our historical sources of financing at favorable rates and terms. The continued deterioration of the credit markets has adversely
impacted our liquidity. This situation has been exacerbated by the recent downgrades of our credit ratings, which have adversely impacted our
ability to access the credit markets. Given the current economic environment and the risks associated with the capital markets in general,
including the current unavailability to us of public unsecured term debt and difficulty we had in accessing sufficient commercial paper on a daily
basis, on February 3, 2009, we borrowed the entire available balance of the $3.0 billion committed bank credit lines available to Textron and
Textron Financial Corporation. However, the additional liquidity provided by the bank line draw may not be sufficient to meet our needs, and we
may need to obtain additional financing or raise additional capital.
We are continuing to explore other potential avenues of liquidity, including funding sources in the capital markets, sales of other assets within our
Manufacturing group and new financing structures for the Finance group. However, we may not be able to raise sufficient capital as and when
required if the financial markets remain in turmoil, and any capital we raise may be on terms that are dilutive to existing shareholders or otherwise
unfavorable to us. Any sales of other assets that we may carry out may be completed on unfavorable terms or cause us to incur charges, and we
would lose the potential for market upside on those assets in a market recovery. New financing structures may not be available on acceptable rates
and terms. If our business continues to experience significant challenges, we may face other pressures, such as employee retention issues and
potential loss of suppliers or distributors for our products.
Payments required under our support agreement with Textron Financial Corporation could restrict our use of capital.
As a result of the decision to downsize Textron Financial Corporation and the resulting accounting charges and adjustments recorded in the fourth
quarter of 2008, under the terms of our support agreement with Textron Financial Corporation, we made a cash payment of $625 million to Textron
Financial Corporation to maintain both the fixed charge coverage ratio required by the support agreement and the leverage ratio required by
Textron Financial Corporation’s credit facility. This cash payment was recorded as a capital contribution to Textron Financial Corporation. We may
be required to make additional capital contributions to Textron Financial Corporation in the future in order to maintain these ratios. While capital
contributions to Textron Financial Corporation may not increase the aggregate amount of outstanding consolidated indebtedness of Textron and
Textron Financial Corporation, such contributions could restrict our allocation of available capital for other purposes. In addition, recently, from
time to time, Textron Financial Corporation has borrowed from us to meet its liquidity needs, and it may require further borrowings from us for its
liquidity needs in the future, depending upon market conditions. Textron Financial Corporation’s need for borrowings from us could restrict our
use of funds for other purposes.
Our lowered credit ratings limit our access to the capital markets and increases the cost of our funding from the
capital markets.
The major rating agencies regularly evaluate us, including Textron Financial Corporation. Both our long- and short-term credit ratings have
recently been subject to downgrades to the ratings disclosed on page 32 in the “Credit Ratings” section. In connection with these rating actions,
the rating agencies have cited concerns about the Finance group, including execution risks associated with our decision to exit the non-captive
finance businesses and the need for Textron Inc. to make capital contributions to Textron Financial Corporation, as well as lower-than-expected
business and financial outlook for 2009, the increase in outstanding debt resulting from the drawdown on our credit facilities, weak economic
conditions and continued liquidity and funding constraints. Failure to maintain investment grade credit ratings that are acceptable to investors
would prevent us from accessing the commercial paper markets, and may adversely affect the cost and other terms upon which we are able to
obtain other financing, as well as our access to the capital markets.
Difficult conditions in the financial markets have adversely affected the business and results of operations of our Finance
segment, and we do not expect these conditions to improve in the near future.
The financial performance of our Finance segment depends on the quality of loans, leases and other credit products in its finance asset portfolios.
Portfolio quality may be adversely affected by several factors, including finance receivable underwriting procedures, collateral quality, or