Ford on Monday announced the completion of debt restructuring initiatives that will reduce its automotive debt by US$9.9bn from $25.8bn at 31 December, 2008, and lower its annual cash interest expense by over $500m based on current interest rates.
“By substantially reducing our debt, Ford is taking another step toward creating an exciting, viable enterprise,” said President and CEO Alan Mulally. “As with our recent agreements with the UAW, Ford continues to lead the industry in taking the decisive actions necessary to weather the current downturn and deliver long-term profitable growth.”
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On 4 March, Ford and Ford Credit announced the major components of a comprehensive debt restructuring including a conversion offer in which Ford offered to pay a premium in cash to induce the holders of the $4.88bn principal amount outstanding of its 4.25% senior convertible notes due 15 December, 2036 to convert them into shares of common stock.
There was also a $500m cash tender offer by Ford Credit for Ford’s senior secured term loan debt and a $1.3bn cash tender offer by Ford Credit for some of Ford’s unsecured, non-convertible debt securities.
As of the 3 April expiration date, approximately $4.3bn principal amount of convertible notes were validly tendered and accepted for purchase and Ford will issue about 468m shares and pay $344m in cash ($80 in cash per $1,000 principal amount of convertible notes converted), plus applicable interest on the expected settlement date of 8 April.
Approximately $579m of convertible notes will remain outstanding.
On 23 March, Ford Credit announced that the term loan offer, which expired on 19 March, 2009, had been over-subscribed. Based on tenders received, Ford Credit increased the amount of cash used from $500m to $1bn to purchase $2.2bn principal amount of Ford’s term loan debt at 47% of par, settling this on 27 March, following which Ford Credit distributed the term loan debt to its immediate parent, Ford Holdings.
The distribution of the term loan debt is consistent with Ford Credit’s previously announced plans to pay distributions to Ford of about $2bn through 2010. Approximately $4.6bn remains outstanding.
Ford Credit announced separately on Monday results of its previously announced $1.3bn cash tender offer for unsecured, non-convertible debt securities. As of the 3 April 2009 expiration date, approximately $3.4bn principal amount of notes were validly tendered and accepted for purchase which will result in an aggregate purchase price of approximately $1.1bn to be paid by Ford Credit on the expected settlement date of 8 April. Upon settlement, such notes will be transferred from Ford Credit to Ford in satisfaction of certain of Ford Credit’s tax liabilities to Ford.
Approximately $5.5bn aggregate principal amount of the notes will remain outstanding.
Ford has has also announced the deferral of $184m in interest on trust preferred securities annually.
