Ford Cuts its Debt by $1.9 Bn

Ford offered its noteholders the possibility to exchange notes for shares of stock and cash. About three quarters of those eligible accepted the company's offer, thus enabling it to reduce its debt by more than $1.9 billion, the automaker said Wednesday.

The offer, made in October, adds to Ford's debt reduction so far this year to $12.8 billion, lowering annual interest costs by $1 billion, said the company in a statement. The company's debt is down to about $21 billion from the $34 billion it held at the end of 2009. Ford expects to have more cash then debt by the end of the year.

The offer of cash and stock to holders of $3.5 billion in convertible notes due in 2016 and 2036 stood until 12 a.m. on Wednesday. Holders of over $2.5 billion worth of notes accepted the offer. The actual debt reduction is smaller than the notes converted in the offer because of accounting rules converting notes that are convertible to stock.

As part of the offer, Ford will have to pay $534 million in cash and 274 million shares of common stock. The stock was issued at the beginning of 2010 and should not dilute the value of existing shares. It has about 3.47 billion publicly issued and sold common shares.

"It is a good deal for both sides", said Stephen Brown, senior director of Fitch Ratings in Chicago. "For $500 million cash, Ford takes $2 billion in debt off its balance sheet," Brown said, adding that gross debt is a key factor in rating companies.

"These successful conversion offers represent another significant step toward our goal of reducing our automotive debt and improving our balance sheet," said Ford's Chief Financial Officer Lewis Booth.
If you liked the article, please follow us:  Google News icon Google News Youtube Instagram

Would you like AUTOEVOLUTION to send you notifications?

You will only receive our top stories