Wires

Navistar to sell 10 mln shares, seeks liquidity cushion

Oct 24 (Reuters) - 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 $547 million.

``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 caution.''

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.