By on November 25, 2009

Safe... for now (courtesy:thepiratesdilemma.com)

Managing debt is a most American exercise, and after finishing the third quarter of this year owing $26.9b in debt, Ford is in management mode. According to Reuters, Ford will repay $1.9b of its $10.7b “mother of all subprime mortgages” revolving credit line, part of $23.5b in loans Ford backed with all of its assets (up to and including its logo) in 2006. $7.2 billion of revolver debt is being pushed on down the road though, from November 2011 to November 2013, and $724m has been converted to a term loan due in December 2013. More worryingly, lenders refused to roll over $886m of the debt Ford requested, bringing it due in December 2011.

But as many Americans have learned, extending debt isn’t exactly a perfect solution. Though details aren’t available on the terms of the extension, but it was reported prior to the deal that Ford was offering one percent higher interest and undisclosed additional fees to lenders who agreed to extend debt. Feel the burn? Oh, and Ford still plans on offering another $2.3b in senior convertible notes, which come due in 2016 in the form of a 4.25 percent coupon or common stock at $9.30 a share. And sell another billion dollars of common stock. Proclaiming comebacks is another popular American pastime, but until crushing debts (even in the metaphorical sense) are being paid down rather than managed, they tend to ring a little hollow. Ford’s “debt issue” is here to stay.

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10 Comments on “Ford Pushes Back $7.2b Of Logo-Backed Debt...”


  • avatar
    ott

    Sounds like a corporate version of robbing Peter to pay Paul…

  • avatar

    Maybe Ford should talk to GM about a loan. It worked for Opel.

  • avatar
    dwford

    That the creditors were willing to extend the term is a good thing. It means that they believe Ford will be around to pay when the time comes. Ford is better served making sure that it’s next generation of cars aren’t short changed  by a cash crunch than trying to scrap together enough cash to pay off the notes on the original date. The creditors couldn’t be total rollovers, so they kept some of the debt on the original schedule.

  • avatar
    Robert.Walter

    BTW:  Ed, the graphic depicts the old version of the Ford logo, in use since the mid-80′s, the newer one is without the chrome frame and inner co-ovoid stripe.

  • avatar
    Telegraph Road

    “Ford’s “debt issue” is here to stay”.
    What?  TTAC discusses Ford’s finances without the header “Ford Death Watch”?  In case you haven’t learned yet,  Ford’s Treasury Department is very capable of managing its debt.   If you had invested in F stock a year ago, oh never mind…

  • avatar
    Mcgilligan2

    Not to be a Debbie Downer and rain on Ford’s parade or anything, but-
    With interest rates as low as they are, the creditors would get about 0% reinvesting the principal if they were to let the loan mature and invest elsewhere.  It’s not a vote of confidence in Ford, it’s just the reality of current investment opportunities.

    • 0 avatar
      Monty

      It’s okay to be a debbie downer, because you balance out the latest from Peter De Lorenzo at Autoextremist.com , who’s waxing poetic about the incredible turnaround engineered by Bill Ford and Alan Mullaly. According to De Lorenzo,  Mullaly is considered the modern day Alfred Sloan now.

    • 0 avatar
      rnc

      They would just re-loan it not buy treasuries.  The intention was always to roll the loans, every large corporation does it (GE and ATT come to mind)

      In terms of the $823 due in 2011, about 14 different companies made the loans to Ford as a consortium, some disappeared during the crash (lehmans and bear stearns) and several more have been absorbed (merrill lynch).  There’s wouldn’t and then there’s couldn’t. 

  • avatar
    Durwood

    It makes sense for ford to extend to hopefully get past this down spell in the economy. I think it is a smart move as everyone is just trying to ride out the storm now. If the economy picks up where they make money then they can always pay more on the debt.

  • avatar
    adonasetb

    What happened to chariot sales just before the fall of the Roman Empire?


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