Moody’s Investor’ Service has issued new ratings for Ford Motor Company and Ford Motor Credit debt, triggering a long-awaited return to investment grade.
“This is one of the best days that I can remember,” said Bill Ford, announcing the news via loudspeakers to staff at the firm’s world headquarters in Dearborn.
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The senior unsecured rating of Ford improves to Baa3 from Ba2, while Ford Motor Credit is now classed by Moody’s as Baa3 (formerly Ba1). This means that Ford bonds are now considered to be of investment grade, as another agency, Fitch, positively re-rated Ford’s debt last month.
As a result of the shift to investment grade, assets formerly pledged to lenders by Ford in exchange for a US$23.5bn loan in December 2006 can now be reclaimed. Such security for lenders famously included the blue oval logo as well as the Mustang and F-150 trademarks.
“The key factor in our considering an investment-grade rating for Ford was whether or not the company would be able to sustain its strong performance,” said Bruce Clark, Moody’s senior vice-president. “We concluded that the improvements Ford has made are likely to be lasting.”
The agency notes that Ford has approximately US$20bn in cash, has been disciplined in cutting costs and continues to avoid offering excessive incentives to buyers of new vehicles in the US market.
Ford Motor Company, which had US$13.7bn in debt at the end of the first quarter, says it expects that to fall to US$10bn by 2015. In March, it resumed paying a dividend for the first time since September 2006. The company has now been profitable for twelve consecutive quarters.
Author: Glenn Brooks
