Ford Raising $3.3 Billion, Paying Down Credit Line

[davidlane]

Nov. 2 (Bloomberg) -- Ford Motor Co., after posting a surprise third-quarter net profit, said it is raising as much as $3.3 billion, while paying down and pushing back the maturity of a $10.7 billion line of credit to strengthen its balance sheet.

Ford said it is seeking to pay down 25 percent of the revolver and move back by two years, to 2013, the maturity of the remaining $8 billion liability. Ford also said it is offering as much as $2.3 billion in senior notes that can be converted to common stock or cash in 2016.

Ford also in December will offer as much as $1 billion in common shares through broker-dealers.

“We expect the moves will enhance Ford’s automotive liquidity and over time reduce the company’s debt burden, providing an additional cushion given the still uncertain state of the economy,” Ford Chief Executive Officer Alan Mulally said in a statement. Earlier in the day, it announced a surprise $997 million third-quarter profit.

Ford, the only major U.S. automaker to avoid bankruptcy, is seeking to reduce a debt load larger than those of General Motors Co. and Chrysler Group LLC, which shed liabilities in reorganization. GM’s liabilities will be $22.3 billion in 2011, while Ford’s will total $38.1 billion, Barclays Capital auto analyst Brian Johnson said in an Oct. 20 research note.

Taking Advantage

Ford is taking advantage of shares that have more than tripled this year. Ford rose 58 cents, or 8.3 percent, to $7.58 at 4:15 p.m. in New York Stock Exchange composite trading.

Lenders representing $6 billion of Ford’s revolving credit line have already agreed to reduce and extend the maturity from Dec. 15, 2011, to Nov. 30, 2013, Ford Chief Financial Officer Lewis Booth said in an e-mail to employees.

In exchange, lenders may receive a reduction of as much as 25 percent in their revolving commitments, a 1 percentage point increase in interest rate margins and an increase in fees and payment of an up-front fee. Revolving lenders have until Nov. 18 to submit their response.

“The early response from our lenders to this approach has been very positive,” Ford Chief Financial Officer Lewis Booth said in an e-mail to employees today. “Improving our balance sheet is not just reducing debt and raising capital. The most important thing we all can do is help the company return to profitability and generate positive cash flow.”

Cash Position

Ford, which lost $30 billion from 2006 through 2008, said today it had positive cash flow of $1.3 billion in the third quarter. That was Ford’s first positive cash-flow quarter since 2007. Its $1.1 billion pre-tax profit in the third quarter was the first since the first three months of 2008, Ford said.

Ford said it finished the third quarter with $23.8 billion in automotive cash, up from $21 billion at the end of the second quarter.

http://www.bloomberg.com/apps/news?p...fektPiMk&pos=5

[Suziebob]

This is a good move. I'm (sort of) an econ major and I believe it's pivotal that our companies get out of debt like this. The greatest American companies right now have huge cash reserves, not debt. Ford would be unstoppable without this crushing debt.

[stormwatcher]

So far so good for Ford. Here's my question though, what is Ford's stock rated at? Is it still rated as a junk stock or is it beginning to move out of the basement and back into a respectable stock?

[stormwatcher]

Just found the answer to my own question.

http://money.aol.ca/article/moodys-b...atings/731247/

Moody's Investors Service on Monday raised its corporate family rating for Ford Motor Co. to "B3" from "Caa1," citing the progress the automaker has made toward improving its product portfolio and cost structure while preserving its cash reserves.

The ratings service also raised Ford's probability of default rating to "B3" from "Caa3," secured credit facility to "Ba3" from "B1," unsecured debt to "Caa1" from "Caa2," and trust preferred stock to "Caa2" from "Caa3."

Moody's backed Ford's speculative grade liquidity rating at "SGL-3," which indicates adequate liquidity for the next 18 months. The outlook is stable.

Caa = poor grade, high risk
B= medium grade, moderate risk
SGL-3 = Ford isn't out of the woods yet, but they can keep the wolves at bay for awhile yet

[PistonsFan]

Ford shares were trading down in after-hours on this news.

Good for the balance sheet, not great for the shareholder.

Hopefully Ford can continue to hit positive earnings. Historically, they have been EXTREMELY unpredictable with occasional profitable quarters mixed in between nasty quarters. However, I think the fundamentals are different (better) now.

They still have a ways to go in liquidity. Their Q2 net equity was ~-$10B. I haven't seen where they are at after Q3... yet.

[neshapop]

Originally Posted by PistonsFan

Ford shares were trading down in after-hours on this news.

Good for the balance sheet, not great for the shareholder.

Hopefully Ford can continue to hit positive earnings. Historically, they have been EXTREMELY unpredictable with occasional profitable quarters mixed in between nasty quarters. However, I think the fundamentals are different (better) now.

They still have a ways to go in liquidity. Their Q2 net equity was ~-$10B. I haven't seen where they are at after Q3... yet.

Time to delute Ford stock value. Q3 results were good, now screw the sheep.

[wescoent]

Just remember who REALLY owns Ford Motor Company.

I'll give you a hint... it's NOT the common shareholders.

[Barry Badrinath]

Part of Ford's management feels the economy may sputter along for another 18 months or so. Better to retrench when you can, so you deal with the next wave. Another smart move.

[K-1]

Originally Posted by wescoent

Just remember who REALLY owns Ford Motor Company.

I'll give you a hint... it's NOT the common shareholders.

The Ford family, perhaps? With a vast majority of preferred shares.

[wescoent]

Originally Posted by K-1

The Ford family, perhaps? With a vast majority of preferred shares.

Yeah... Ford common shareholders have little meaningful power. Ford is owned and run by the Ford family, and by buying Ford shares, you're basically going along for the ride.

[Joe in T.O.]

So basically, they are taking money out on a line of credit to pay off their visa bill?

[K-1]

Originally Posted by Joe in T.O.

So basically, they are taking money out on a line of credit to pay off their visa bill?

It does seem like they are paying old debt by offering new debt, doesn't it?

[EgoFG]

I would love to see a 10Q SEC filing from GM, alongside the one Ford will release in a month or so.

I dont know US law, but I guess that as GM shares are not currently being traded GM has no obligation to file the SEC reports