By on March 4, 2009

Dow Jones [via CNN Money] reports that FoMoCo and Ford Credit are prepared to drop precious cash to coax debt holders into converting their notes into Ford stock. Gory details of the deal are below the fold, but numerous sources are confirming that this debt restructuring is a condition for VEBA to accept company stock per its recent agreement. Plus it’s kind of an awesome PR move, in an “eat the weakest first” way. Ford is out doing all the things GM and Chrysler should have done: going to the mats with the UAW and restructuring long-term debt. The two firms actually receiving bailout money dither it away while playing catchup. Of course this doesn’t mean Ford is out of the woods yet, as $10.4B is less than half of Ford’s $25.8B pile o‘ debt. Plus, nobody has actually accepted the offer yet either.

According to Dow Jones, Ford is asking holders of “Outstanding 4.25% senior convertible notes due Dec. 15, 2036, to convert about $4.9 billion in convertible notes. Holders who elect to convert the note into shares of Ford common stock will receive 108 shares of Ford common stock plus $80 in cash for each $1,000 principal amount converted.”

Also, “Ford Motor Credit, its wholly-owned finance arm, has commenced a $1.3 billion cash tender offer to purchase Ford’s unsecured, nonconvertible debt securities, of which about $8.9 billion aggregate principal amount is outstanding. The finance arm also has started a separate $500 million cash offer to buy Ford’s senior secured term-loan debt. The term offer will be conducted through a “dutch auction” under which term-loan lenders will be invited to submit bids to sell their term-loan debt.”

And if that ain’t enough minutiae for ya, know this. Ford also announced its intent to exercise its right to defer future dividend payments on the 6.50 percent cumulative trust preferred securities of Ford Motor Company Capital Trust II beginning in April.

Get the latest TTAC e-Newsletter!

Recommended

32 Comments on “Ford Makes Offer On $10.4b In Long-Term Debt...”


  • avatar
    Runfromcheney

    Stuff like this is the exact reason why Ford isn’t standing in the breadline like GM and Chrysler. They actually have brains and aren’t waiting until they are completely broke before taking action to restructure the company. A hat tip to you, Mr. Mulally.

  • avatar
    Mark MacInnis

    With forward progress like this, I don’t understand why Ford’s stock price isn’t passing GM’s…..not curious enough to take a flyer on FoMoCo, but just curious enought to watch it.

    As RunfromCheney put it so well, a tip of the chapeau to Big Al….

  • avatar
    thalter

    @Mark MacInnis

    Stock is not climbing because this is not necessarily good for the shareholders (although still better than Ch 11). Assuming these shares in the debt-to-equity swap come from some new offering, this this will dilute the value of all the existing shareholders. as they are effectively cutting the same size pie into smaller slices.

  • avatar
    compy386

    Unfortunately for Ford, Ford Credit has about 126 billion in debt of which about 70 billion is securitized.

  • avatar
    dwford

    Is Ford really going to lap GM and Chrysler AGAIN by getting this debt conversion done?! GM and Chrysler continue to embarrass themselves with their inaction.

  • avatar
    BDB

    Ford is going to come on strong when this recession ends. Just watch.

  • avatar
    guyincognito

    Whatever happens with Ford, no one can blame Mulally.

  • avatar
    BDB

    guyincognito-

    A’int that the truth?

  • avatar
    Runfromcheney

    BDB: I pointed that out yesterday. I mentioned that the reason why everyone believes that Ford will be the last one standing is because they will be ready with a fresh product line when the economy picks up, while GM and Chrysler will be trotting out the same outdated, uncompetitive models, and will be caught with their pants down, again.

    Current score:
    Ford: 112
    GM:0
    Chrysler:-5

  • avatar
    King Bojack

    Remember how everyone shit their pants in fear when Ford hired Mulally?

  • avatar
    BDB

    Runfromcheney-

    LOL your scoreboard is the truth.

    I didn’t realize it until the other day when our car buying history was questioned on this site, but it seems I’m a Ford guy.

    The only non-Ford car I’ve owned is a Miata, and even then Mazda has a special relationship with Ford. So I’m happy to see them in the strongest position of the D-3.

  • avatar
    928sport

    For the 25 to 30 mill a year Mulally gets he better walk on water,Time will tell.

  • avatar
    maniceightball

    You really do get the sense that they’re honestly trying. It’s refreshing.

  • avatar
    MBella

    I am recently finding it funny how Ford’s turnaround plan seems to be working. Back when they hired Mulally and mortgaged everything including the logo, everyone assumed Ford was going to go first. (I was one of the people on this bandwagon) The general thought was, “What is this aircraft guy going to do with a car company. He doesn’t know the car industry.” It seems like all it takes is a little common sense, and you can get far.

    What I’ve heard from people that talked to Mulally directly, is that his changes are uphill battles against the board. It seems like he is getting through, and with a bit of success it has to be getting easier.

  • avatar
    Kurt.

    Terrm? Is is cold where you are Mr. Niedermeyer?

    :)

  • avatar
    hazard

    compy386 :
    March 4th, 2009 at 8:53 pm

    Unfortunately for Ford, Ford Credit has about 126 billion in debt of which about 70 billion is securitized.

    Isn’t Ford Credit (or Ford Financial?) a separate company legally, like GMAC from GM? Can’t Ford, if necessary, let its financial subsidiary simply go bankrupt, but survive otherwise?

  • avatar
    Kurt.

    Do you think this will fly? That’s currently $285 (round) for evey $1000. what investor would stoop to this? Stock price would have to raise back up to $8.5 just to break even (but you don’t have to wait for 2036 – if Ford is even around).

  • avatar
    dpeppers

    Ford was just smart enough to borrow every dime they could before the bust. They are but 6 months behind the other two and if timing goes bad they will ask for money also. Say what you will, letting Lehman Brothers fail and the credit crunch has mortally wound the entire automotive industry. You all stand around here and armchair quarterback, but if the SAAR does not increase soon you will see a world of hurt across the industry. The suppliers are barely holding on, even the almighty Toyota is backdooring some cash from the guberment of Japan.

  • avatar
    Rod Panhard

    Three cheers for Ford! Just wait till the mirrors get smashed and the smoke clears, they’ll still be standing. And as the “Last Remaining ‘American’ Car Company,” their cars will sell like H-D logo’d do-rags in August at Sturgis, SD.

  • avatar
    dwford

    Kurt:

    Ford is trying to convert their unsecured debt. If Ford goes C11, the unsecured creditors will get screwed, because most of Ford’s debt is secured by assets already, so there won’t be any money left. The deal Ford is offering is actually a premium over what the debt is trading for on the market, so if a debt holder wants out, they can make a little extra with Ford vs. selling the debt on the open market.

  • avatar
    SegwayCop

    Probably a dead thread but two things bother me about Mulally.
    1. He was very quick to secure his gold-plated pension upon arrival from Boeing. Could it be some projections he held related to this: http://www.chicagobusiness.com/cgi-bin/article.pl?articleId=31402
    Do Boeing management draw from the same pension pool? Is this similar to GM’s pension “borrowing” and who is involved?

    2. The Boeing Dreamliner was reported to be delayed 2 years (union strike, whistleblower, etc). Wasn’t this program touted on his resume in 72 font for all of us? Did he leave it for someone else to clean up? What gives?

  • avatar
    RetardedSparks

    FORD = Final One Remaining in Detroit

  • avatar
    dwford

    SegwayCop:

    Would you give up your cushy job at Boeing and forfeit your pension to go help a struggling automaker for peanuts? No. Ford wanted the best, and paid what they had to pay to get him. Many companies do this. Ford’s problems are not Mulally’s fault. He should not have to give up a dime to fix the problems he was hired to solve.

  • avatar
    umterp85

    ReatardedSparks….if you came up with that FORD acronym descriptor…kudos…very creative !!

  • avatar
    schadenfred

    I think you should either delete an r from “terrm”, or else add a bunch more.

  • avatar

    schadenfred :

    Doh! Text amendeded.

  • avatar
    RetardedSparks

    umterp85: As far as I know, I did. Thanks.

  • avatar
    windswords

    This is no genius move by Ford. They are just trying to do the same thing that GM and GMAC are trying to do. Yes, they are sweetening the deal a little. But if you exchange your secured debt for unsecured stock you get nothing in a C11, let alone a C7. Would you do that? I wouldn’t.

  • avatar
    wsn

    windsword, in a C11/C7, your debt will be zero too even if they are secured (before C11/C7, Ford will draw LOC, and government is placed at first for savage value).

  • avatar
    windswords

    Not true. In a BR, there is a pecking order of who gets paid. Secured debt holders are at or near the head of the line. Stockholders are dead last. Even in C7 liquidation, the assests are sold off to pay the debt holders in the previously mentioned pecking order, often for pennies on the dollar. But it’s still better than zero which is what stockholders get. With Ford bleeding cash why would you exchange your secured debt for unsecored stock?

  • avatar
    Runfromcheney

    windswords: I didn’t think it was a “genius” move, but it is a good example of Ford being ahead of the game and actually trying. GM AFAIK didn’t start trying to convert debt into equity until they were running on government funds.

    So it is just an example of how Ford is trying to restructure instead of just doing nothing then expecting us to keep them alive just because they employ a lot of people. Like some OTHER automakers.

  • avatar
    dpeppers

    runfromcheney

    They are doing as they were told. They met with the “Task Force”. They were told to get ahead of the game, because they are running out of money. They are following the pattern of assistance laid out by the task force. If you can’t see the coincidence of the two, then I hope this has helped. Ford is in the same bucket with the rest of them foriegn and domestic. This last man standing crap isn’t going ot happen. We are at a cliff staring at the abyss when it comes to cars sales. there is no company on earth that came adjust quickly enough. Honda may be the shining light (small enough to be flexible enough).


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • retrocrank: A couple of decades ago I asked my farmer friends (a.k.a. ag producers) why their huge tractors were...
  • The Comedian: Would it pass GM’s own toolbox test? https://youtu.be/GrahNMrlOIY
  • ToolGuy: Latest Proposal to OEM’s Which Will Not Be Adopted… “Road Warrior Edition” or model...
  • ToolGuy: Corey, I don’t think Mopar was necessarily referring to the input side of the equation.
  • ToolGuy: I think the idea is that many EV fans have or are perceived to have a religious fervor for electricity and a...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States