Fitch Ratings has downgraded Ford Motor Company’s senior unsecured ratings to ‘B-/RR5’ from ‘B/RR4’ due to the increase in size of both the secured facilities and the senior unsecured convertible notes being offered.
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The upsizing of these facilities reduces expected recoveries for unsecured debtholders to between 25-30% under Fitch’s recovery analysis, corresponding to an ‘RR5’ rating (expected recovery of 10-30%). Ford’s ‘B’ Issuer Default Rating (IDR) is unaffected, and the rating outlook remains negative, Fitch said in a statement.
Ford has announced its intent to increase the size of its secured revolving credit facility to $US10.5-$11.5bn, up from $8bn previously. Ford will also increase the size of its senior unsecured convertible note offering from $3bn to $4.5bn. The total amount of the financing package now being raised could total $23bn, up from a previous expectation of $18bn. As much as $18.5bn of this amount is expected to be on a secured basis, further impairing the position of unsecured holders. Unsecured debt outstanding that would share in recoveries in the event of a bankruptcy will expand to $22.5bn from approximately $18bn at 30 September, 2006.
“The increased liquidity will provide Ford with additional time and resources as it progresses in its restructuring plan, and is expected to allay any concerns regarding liquidity during 2007,” Fitch said.
Fitch has downgraded the following ratings with a negative rating outlook: Ford Motor Co. senior unsecured debt to ‘B-/RR5’ from ‘B/RR4’; Ford Holdings senior unsecured debt to ‘B-/RR5’ from ‘B/RR4’; and Ford Motor Co. of Australia senior unsecured debt to ‘B-/RR5’ from ‘B/RR4’.
Fitch’s Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default.
