Ford To Repurchase Up To $5 Billion In Junk Bonds To Restore Credit Rating

Ford To Repurchase Up To $5 Billion In Junk Bonds To Restore Credit Rating
Free-Photos / Pixabay

Ford Motor Company (NYSE:F) is said to buy back about $5 billion of its high-yield bonds in a move to restructure its balance sheet, which ballooned with emergency borrowings when car manufacturers were forced to shut down operations in 2020.

Get Our Activist Investing Case Study!

Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!

Q3 2021 hedge fund letters, conferences and more

Short-Seller Spruce Point Highlights Its Latest Canadian Consumer Short: Saputo

InvestReputed short-seller Spruce Point Capital Management released its latest short report this week. The firm is shorting Canadian dairy and grocery manufacturer Saputo. Spruce Point chief Ben Axler believes the company is entering a phase of declining growth and highlights the financial stress and growing challenges he sees it facing, not only in Canada but Read More

Bond Buyback

As reported by CNBC, Ford is repurchasing most of the $8 billion in bonds the firm issued at the onset of the Covid pandemic at lofty yields of between 8.5% and 9.625%.

Ford Treasurer Dave Webb said the automotive giant is also buying back older bonds at similarly high yields to improve its credit rating and take it back to the investment-grade status it lost in March last year.

“Ford expects to fund the buyback with cash on hand, which totaled about $31 billion to end the third quarter. Webb said a $1 billion or more ‘green’ bond could follow as part of a wider effort to ‘aggressively restructure’ its balance sheet under its Ford+ turnaround plan. He said the company is looking to issue 10-year bonds that pay between 3.5% and 4.5%,” CNBC asserts.

During a call, Webb told reporters: “We think it’s the time to aggressively restructure the balance sheet, lower our interest costs, and really clear the decks for 2022 and beyond. That’s really what we’re looking to accomplish here.”

The buyback stems from Ford’s new “sustainable financing framework,” deemed by the automaker itself as a one-off in the North American car manufacturing business. The framework will center around the electrification of its models plus additional environmental areas.

Investing In EVs

It’s time to deleverage our balance sheet, reduce our interest expense going forward, and we think it’s another good step [back] towards investment grades,” Ford’s CFO John Lawler said.

Lawler emphasized Ford is going to invest “whatever it takes” to drive the growth of electric vehicle initiatives: “If we need to invest more because we have growth opportunities and it will give us a great return, we’ll do that.”

The company revealed it will invest $30 billion in electric and autonomous vehicles, as $15 billion corresponds to capital expenditures the company announced.

“The actions that we’re taking here on the balance sheet further support that effort and intent. We think they, certainly, should be viewed as a credit positive,” Webb said.

Ford is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.

Cristian Bustos is senior editor for Previously, he was the news correspondent in Germany for Colombian radio broadcast Blu Radio, where he covered the 2017 German federal election and the 2017 G20 Hamburg summit. He was also public relations consultant to EY and HAYS, and has covered a wide range of topics including business, finance, and international relations, as well as verticals such as automotive, aerospace and renewable energy. Email him at [email protected]
Previous article These Are The Ten Top Muni New Jersey Funds
Next article FOMC Preview And Likely Market Reaction

No posts to display