Ford Reduces $1.9 Billion In Debt

Posted Nov 26, 2010

Ford Motor Company (NYSE:F) is working on ways to improve their investment-grade credit rating and they have reduced debt by over $1.9 billion. They paid investors convertible debt to exchange notes for shares. Ford has been able to strengthen their balance sheet and has lowered annualized interest costs by around $180 million. Below is the full press release:

FORD FURTHER REDUCES ITS DEBT AND STRENGTHENS BALANCE SHEET THROUGH CONVERSION OFFERS

-Ford today announced the results of conversion offers that will reduce the company?s outstanding Automotive debt by more than $1.9 billion, lowering its annualized interest costs by about $180 million

-Including the conversion offers, the recent $3.6 billion prepayment on VEBA Note B, and net debt reductions over the first nine months, Ford has reduced its Automotive debt by $12.8 billion this year, lowering its annualized interest costs by nearly $1 billion. Ford expects to be net cash positive by the end of 2010
-$554 million principal amount of Ford?s 4.25% Senior Convertible Notes due December 15, 2036 and $1.992 billion principal amount of its 4.25% Senior Convertible Notes due November 15, 2016 were validly tendered and accepted for conversion pursuant to Ford?s conversion offers
-Ford will pay $534 million in cash premiums and issue 274 million shares of Ford common stock to convertible note holders. The shares of Ford common stock to be issued have been included in Ford?s calculation of diluted earnings per share since the beginning of 2010
-The conversion offers will result in a fourth quarter 2010 special item charge of approximately $960 million

DEARBORN, Mich., Nov. 24, 2010 ? Ford Motor Company (NYSE: F) announced today the results of conversion offers that will reduce the company?s Automotive debt by more than $1.9 billion, further strengthening its balance sheet and lowering annualized interest costs by about $180 million.

Including the conversion offers, the recent $3.6 billion prepayment on VEBA Note B and net debt reductions over the first nine months of 2010, Ford has reduced its Automotive debt by $12.8 billion this year, lowering its annualized interest costs by nearly $1 billion.

Ford launched the conversion offers Oct. 26, 2010, offering to pay a premium in cash to induce the holders of any and all of its outstanding 4.25% Senior Convertible Notes due December 15, 2036 (the ?2036 Convertible Notes?) and 4.25% Senior Convertible Notes due November 15, 2016 (the ?2016 Convertible Notes? and, together with the 2036 Convertible Notes, the ?Convertible Notes?) to convert their Convertible Notes into shares of Ford?s common stock.

The conversion offers each expired at midnight, New York City time, Nov. 23, 2010, (the ?Expiration Date?). As of the Expiration Date, $554 million principal amount of the 2036 Convertible Notes and $1.992 billion principal amount of the 2016 Convertible Notes were validly tendered and accepted for purchase, according to information provided by Computershare, Inc., the Exchange Agent with respect to the conversion offers. The carrying values of the tendered notes on Sept. 30, 2010 were $399 million and $1.544 billion for the 2036 and 2016 Convertible Notes, respectively.

This will result in the issuance of an aggregate of 274 million shares of Ford?s common stock and the payment of an aggregate of $534 million in cash premiums on the expected settlement date of Nov. 30, 2010. The cash premiums reflect in large part the present value of the interest payments that would have been made on the tendered 2036 and 2016 Convertible Notes to the first date (Dec. 20, 2013, and Nov. 20, 2014, respectively) on which Ford could have terminated holders? conversion rights under the Convertible Notes. The shares of Ford common stock to be issued on the settlement date with respect to the conversion offers have been included in Ford?s calculation of diluted earnings per share since the beginning of the year. In addition to the shares of Ford common stock and cash premiums, Ford will pay accrued and unpaid interest on tendered Convertible Notes for the period from the last interest payment date to (but excluding) the settlement date, which will total $14 million.

Upon settlement of the conversion offers, $25 million principal amount and $883 million principal amount of the 2036 and 2016 Convertible Notes, respectively, will remain outstanding. After settlement, the carrying values of the remaining notes outstanding will be $18 million and $688 million for the 2036 and 2016 Convertible Notes, respectively.

Holders of the 2036 Convertible Notes who validly tendered and did not withdraw their Convertible Notes by midnight, New York City time, on the Expiration Date and whose Convertible Notes were accepted for purchase will receive, for each $1,000 principal amount of the 2036 Convertible Notes converted, 108.6957 shares of Ford?s common stock, plus $190 in cash, plus the applicable accrued and unpaid interest.

Holders of the 2016 Convertible Notes who validly tendered and did not withdraw their Convertible Notes by midnight, New York City time, on the Expiration Date and whose Convertible Notes were accepted for purchase will receive, for each $1,000 principal amount of the 2016 Convertible Notes converted, 107.5269 shares of Ford?s common stock, plus $215 in cash, plus the applicable accrued and unpaid interest.

The conversion offers will result in a fourth quarter 2010 special item charge of approximately $960 million reflecting the cash premiums and non-cash losses (reflecting the difference between the carrying and fair values of the debt) for the tendered 2036 and 2016 Convertible Notes.

[egmCarTech]