US: Ford completes healthcare liability transfer to trust
Ford has completed the transfer of its UAW retiree health care liabilities to the UAW Retiree Medical Benefits Trust (VEBA Trust).
Pursuant to a court-approved settlement agreement, the transfer of these liabilities was implemented by Ford transferring on 31 December these assets to the VEBA Trust:
- An amortising guaranteed secured note maturing 30 June, 2022, with an original principal amount of $6.7bn with a corresponding estimated present value of $4.8bn (New Note A)
- A similar note maturing on the same date with an original principal amount of $6.5bn with a corresponding estimated present value of $4.7bn (New Note B)
- Warrants expiring on 1 January, 2013, to purchase 362m shares of Ford common stock at a price of $9.20 per share
- Assets in a temporary asset account consisting of cash and marketable securities with an estimated value of $620m and assets in Ford's internal VEBA trust consisting of cash and marketable securities with an estimated value of $3.5bn.
- Also on 31 December, Ford made payments on the New Notes:
A scheduled payment of $1.4bn on New Note A
- An additional pre-payment of $500m on New Note A; and
- A scheduled payment of $610m on New Note B, which was paid in cash, in lieu of Ford's option of making New Note B payments in Ford common stock.
Had Ford chosen to pay in stock, the shares would have been issued at the 30-day volume weighted average price of $9.13, while Ford common stock closed at $10 on 31 December, the automaker said.
The New Notes will represent about $7bn in incremental debt on its balance sheet.
"The transfer of these health care liabilities to the VEBA Trust is the culmination of several years of work and will significantly improve our competitiveness in the US," said Lewis Booth, chief financial officer.
"We have removed a substantial health care liability from our balance sheet and have significantly reduced health care expenses. We also have shown confidence in our liquidity and One Ford plan by pre-paying $500m of debt owed to the VEBA Trust."