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News   November 25, 2010   by CARS Magazine

Reuters: Ford Motor cuts debt by US$1.9 billion

Ford Motor Co is cutting its debt by US$1.9 billion in a bid to strengthen its balance sheet and get itself rated investment grade again, according to Reuters.


Ford Motor Co is cutting its debt by US$1.9 billion in a bid to strengthen its balance sheet and get itself rated investment grade again, according to Reuters.

In Ford’s tender offer to reduce its automotive operations debt, holders of some US$2.55 billion of senior convertible notes due in 2016 and 2036 accepted cash and company stock for debt.

That reduces Ford’s annual interest expense by about US$180 million, the automaker said.

Ford borrowed heavily in late 2006, allowing it to avoid the bankruptcies that felled rivals General Motors and Chrysler last year, but leaving it with a heavy debt load.

The automaker expects a solid profit in 2010 and has cut its automotive operations debt by about US$12.8 billion this year, reducing annual interest expense by nearly US$1 billion.

Ford also expects to be net cash positive in its automotive operations — meaning it would have more cash than debt — by the end of 2010. It would be the first time that this would have happened since the second quarter of 2008.

Ford will pay US$534 million in cash premiums and on Nov. 30 issue 274 million shares of common stock to convert the notes. Ford has included the stock in its diluted earnings per share since the start of the year.

The automaker expects to take a US$960 million charge in the fourth quarter because of the offer.

There were nearly US$3.5 billion of senior convertible notes eligible for the conversion offer. Nearly all of the 2036 notes were tendered as were roughly two-thirds of the 2016 notes.

Ford shares were up 14 cents at US$15.84 Wednesday on the New York Stock Exchange.


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