Ford Credit spending money to save Ford
 

Ford Motor Co.’s credit arm today said it would double the amount of money it is making available to buy back the parent company’s secured loan debt because more bondholders signed up for the deal than Ford had initially hoped.

Now, Ford Credit is making $1 billion available in an effort to buy back $2.2 billion in loan debt at 47 cents on the dollar.

“We are very pleased with the results to date of our debt restructuring initiatives,” said Ford Treasurer Neil Schloss. “The cash tender offer by Ford Credit for Ford’s senior secured term loan debt has been over-subscribed, and the decision was made to increase the amount of cash used so Ford Credit could purchase additional term loan debt. In addition, the cash tender offer by Ford Credit for Ford’s unsecured, non-convertible notes has resulted in nearly $3.4 billion principal amount of notes being tendered so far. With these tenders, we have taken significant steps towards reducing Ford’s long-term debt and strengthening our balance sheet.”

Analysts at Standard & Poor’s said the amount of debt tendered so far will save the Dearborn automaker approximately $560 million annually, though the firm does not plan to significantly increase the company’s credit rating because of the prevailing instability in the automobile industry.

“We currently expect to assign this new corporate credit rating to Ford in the first half of April. Our preliminary expectation is that, even with this debt reduction, the corporate credit rating would likely not rise above the ‘CCC’ category immediately following the consummation of a debt exchange,” said analyst Robert Schulz. “We recognize that the post-exchange capital structure will result in lower debt and interest costs. However, we believe many fundamental business risks would remain unchanged for at least the rest of 2009 and perhaps longer, most notably the company’s exposure to deteriorating vehicle demand globally, but also the substantial execution risk of the company’s ongoing restructuring.”



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