Ford Pushes Back $7.2b Of Logo-Backed Debt

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • Telegraph Road Telegraph Road on Nov 25, 2009

    "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...

  • Mcgilligan2 Mcgilligan2 on Nov 25, 2009

    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.

    • See 1 previous
    • Rnc Rnc on Nov 26, 2009

      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.

  • Durwood Durwood on Nov 26, 2009

    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.

  • Adonasetb Adonasetb on Nov 26, 2009

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