Ford aims to borrow $18 billion
Ford Motor Co. said Monday that it was arranging about $18 billion in financing to help pay for its restructuring and make up for anticipated losses in its automotive operations during the next two years.
The No. 2 U.S. automaker said the financing -- with its domestic factories and other automotive assets used as collateral -- would help protect against a recession or other unanticipated events.
Analysts said that the borrowing made it less likely that the company would sell finance arm Ford Motor Credit Co. but that it could support bigger restructuring efforts. The announcement prompted downgrades of Ford’s debt ratings by Moody’s Investors Service and Fitch Ratings.
The automaker, based in Dearborn, Mich., said a new five-year senior secured revolving credit facility of about $8 billion was intended to replace unsecured credit facilities of $6.3 billion. A senior secured term loan would total about $7 billion, and unsecured capital market transactions would total about $3 billion.
The revolving credit and term loan would be secured by liens on U.S. manufacturing facilities; substantially all of the company’s other domestic automotive assets; certain intellectual property; stock in certain subsidiaries, including Ford Motor Credit and Volvo Cars; and as much as $4 billion in cash.
Ford spokeswoman Becky Sanch said it was the first time the company had used assets such as plants to secure financing. This month Ford had said it was near an announcement on such a deal.
Ford shares fell 36 cents to $8.16.
After the transactions, the company said, it would have about $38 billion at year’s end to fund automotive operations.
“The additional liquidity should be sufficient to give Ford the ability to fund itself for several years, even with considerable negative cash flow,” Rod Lache, an analyst at Deutsche Bank, said in a note to investors.
Ford posted a net loss of $7 billion during the first nine months of the year and has said it will not return to profitability until 2009. The company has offered buyouts and early-retirement packages to all 75,000 of its U.S. production workers and plans to shutter 16 plants.
Ford expects the transactions to close this year. The senior secured credit facilities will be arranged by Citigroup Corporate & Investment Banking, Goldman Sachs Credit Partners and J.P. Morgan Securities Inc.
