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.