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NAVISTAR SHAREOWNERS APPROVE HEALTH CARE SETTLEMENT AGREEMENT AND REVERSE STOCK SPLIT

 -- New Benefits Program and Reverse Stock Split
 To Be Implemented July 1 --
 CHICAGO, June 29 /PRNewswire/ -- Shareowners of Navistar International Corp. (NYSE:NAV) voted to approve the provisions of a settlement agreement regarding retiree health care and life insurance benefits and a reverse stock split at a special meeting of shareowners in Chicago this afternoon.
 With the approval process now complete, Navistar will implement the new retiree health care and life insurance program on July 1. The new program will provide retirees with modified health care and life insurance benefits for life, while reducing Navistar's liability for U.S. retiree health care and life insurance benefits from approximately $2.6 billion to approximately $1.0 billion.
 Navistar estimates that these changes in benefits will yield an annual savings of approximately $90 million. Navistar also expects to achieve $15 million in annual savings from the implementation of managed care programs for active employees and certain retirees over the next few years. In addition, the company plans to pre-fund up to $500 million of the approximate $1.0 billion retiree benefit liability as soon as market conditions permit, and following clarification of certain tax regulations related to the size of the initial offering. Each $100 million of pre-funding which is accomplished will save the company an estimated $9 million in annual costs. The completion of the approval process and implementation of the benefit changes, followed by the initial equity offering, which will be used to pre-fund the base plan trust, will pave the way for the resumption of dividends on Navistar's Series G cumulative convertible preferred stock.
 SETTLEMENT AGREEMENT
 Under the terms of the settlement agreement, Navistar has established two trusts to pay retiree medical costs: a base plan trust and a supplemental trust. The base plan trust will pay retiree medical costs and provide a vehicle for future funding of the base health care program. The company plans to raise capital through the sale of additional shares of stock to pre-fund up to $500 million of the $1.0 billion base plan liability before the end of the year.
 Additionally, as a part of the settlement agreement, on July 1, Navistar will issue approximately 256 million shares of common stock, which will represent 50 percent of the common stock of the company, to the supplemental retiree trust. The supplemental trust will be restricted from selling the shares for up to a five-year period. The supplemental trust will be used to reduce retirees' costs or improve their benefits through the proceeds from the eventual sale of the stock held by the trust and from profit-sharing contributions made to the trust if Navistar achieves certain profit levels.
 The company will include the value of the shares contributed to the supplemental trust -- approximately $450 million -- as a pre-tax charge to income of continuing operations in its financial statements for the third quarter ending July 31, 1993. Because the value of the shares to be issued to the supplemental retiree trust is equal to the charge to income, there will be no impact on total shareowners' equity.
 In approving the settlement agreement, Navistar's shareowners also approved certain amendments to Navistar's corporate charter, including: the issuance of one share of newly authorized preference stock to the UAW and one share to the supplemental retiree trust giving the UAW the right to elect one director and the supplemental retiree trust the right to elect two additional directors to Navistar's board; and the adoption of certain stock transfer provisions that are necessary to preserve the company's substantial net operating loss carryovers. Net operating loss carryovers (NOLs) are a valuable asset of the company, because they can be used to reduce tax liability on future taxable income. Use of NOLs is governed by complicated regulations which restrict their use should an ownership change take place.
 REVERSE STOCK SPLIT
 The one-for-ten reverse stock split, which also was approved today by shareowners, will occur before the opening of trading on July 1.
 "We believe that the reverse split will result in a manageable number of shares of common stock and sustain investor interest in Navistar by producing a stock price that is consistent with market expectations for a company of our size," said James C. Cotting, chairman and chief executive officer.
 Once the reverse split occurs, the company will have approximately 51.4 million shares of common stock outstanding. The conversion ratio and conversion price of the company's Series G and Series D convertible preferred stock and the exercise price of the company's Series A warrants will be adjusted to reflect the reverse split.
 "Now that we've resolved this competitive disadvantage which threatened the long-term financial health of the company, we are well positioned to translate our number one position in the medium and heavy truck and mid-range diesel engine businesses into profitable growth for our shareowners and employees," said Cotting.
 -0- 6/29/93 R
 /Contact: Deborah Spak of Navistar International, 312-836-3232/
 (NAV)


CO: Navistar International Corp. ST: Illinois IN: AUT SU:

TM-MG -- NY094 -- 6945 06/29/93 19:15 EDT
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Publication:PR Newswire
Date:Jun 29, 1993
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