Ford plans to raise another US$3bn through a stock sale and convertible debt offering as it looks to trim its massive debt burden.
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The automaker on Monday reported a $997m profit for the third quarter after its North American unit made money for the first time in four years but is saddled with debt of $26.9bn after mortgaging all its assets – including its blue oval trademark – to raise money to help fund its operations in 2006, Dow Jones noted.
Ford expects to add another $7bn to $8bn to that amount after making payments to the United Auto Workers health retirement fund.
The news agency said the latest move wasn’t a surprise since Ford failed to win more cost-cutting concessions from the UAW that would have frozen wages for new hires and relaxed work rules. The company successfully made a similar move earlier this year to cut its debt by $9.9bn.
This time Ford will use a three-pronged attack, looking to raise $1bn through a stock sale and $2bn through a convertible debt offering. It is also seeking to delay the maturity of its $10.7bn revolving-credit facility to 2013 from 2011. It has already secured lender agreements to delay about $6bn.
“It is a constructive set of transactions that would essentially preserve the company’s cash position and lengthen the maturity of their credit facility, giving them somewhat better financial flexibility,” Bruce Clark, Moody’s Investors Service senior vice president and auto analyst, told Dow Jones.
“These actions support the third pillar of our One Ford plan – finance the plan and improve our balance sheet,” said Ford’s president and CEO Alan Mulally in a statement. “We expect the moves will enhance Ford’s automotive liquidity and over time reduce the company’s debt burden, providing an additional cushion given the still uncertain state of the economy.”
