Dr. Dreyfuss musings
DETROIT -- Ford Motor Co. said Monday it plans to get about $18 billion in financing to help fund its restructuring and help make up for anticipated losses in its automotive operations over the next two years.
The No. 2 U.S. automaker also said the financing -- with its domestic plants and other automotive assets used as collateral -- will help protect against a recession or other unanticipated events.
Analysts said it makes the possibility of Ford selling its finance arm less likely but could support bigger restructuring efforts.
Ford said a new five-year senior secured revolving credit facility of about $8 billion is intended to replace Ford's existing unsecured credit facilities of $6.3 billion. A senior secured term loan will total about $7 billion, and unsecured capital market transactions will total about $3 billion.
The revolving credit and term loan will be secured by liens on U.S. manufacturing facilities, substantially all of the company's other domestic automotive assets, certain intellectual property, stock in certain subsidiaries -- including Ford Motor Credit Co. and Volvo -- and up to $4 billion in cash.
Ford spokeswoman Becky Sanch said it was the first time the company had used assets such as plants to secure financing. Earlier this month, Ford had said it was near an announcement on such a deal.
Ford shares fell 20 cents, or 2.4 percent, to $8.32 in Monday morning trading on the New York Stock Exchange.
Following the transactions, Ford said it will have about $38 billion at year's end to fund automotive operations. That includes cash, cash equivalents, loaned and marketable securities and available credit facilities.
"The additional liquidity should be sufficient to give Ford the ability to fund itself for several years, even with considerable negative cash flow," Rod Lache, an analyst for Deutsche Bank, said in a note to investors.
Dearborn-based Ford lost $7 billion during the first nine months of the year and has said it won't return to profitability until 2009.
The company has offered buyouts and early retirement packages to all 75,000 U.S. production workers and plans to shutter 16 plants to reduce manufacturing capacity to match lower demand for its products as part of its "Way Forward" restructuring plan.
Some Wall Street analysts have questioned why the sale of part of Ford Motor Credit wasn't part of its restructuring update announced in September. Ford has said it didn't plan to sell its finance arm.
At least two analysts said Monday that using assets such as Ford Motor Credit to back the secured loans makes it less likely that Ford will sell the credit arm.
Ford expects the transactions to close before Dec. 31. The senior secured credit facilities will be arranged by Citigroup Corporate and Investment Banking, Goldman Sachs Credit Partners L.P. and J.P. Morgan Securities Inc.
Ford to Get $18 Billion in Financing
DETROIT -- Ford Motor Co. said Monday it plans to get about $18 billion in financing to help fund its restructuring and help make up for anticipated losses in its automotive operations over the next two years.
The No. 2 U.S. automaker also said the financing -- with its domestic plants and other automotive assets used as collateral -- will help protect against a recession or other unanticipated events.
Analysts said it makes the possibility of Ford selling its finance arm less likely but could support bigger restructuring efforts.
Ford said a new five-year senior secured revolving credit facility of about $8 billion is intended to replace Ford's existing unsecured credit facilities of $6.3 billion. A senior secured term loan will total about $7 billion, and unsecured capital market transactions will total about $3 billion.
The revolving credit and term loan will be secured by liens on U.S. manufacturing facilities, substantially all of the company's other domestic automotive assets, certain intellectual property, stock in certain subsidiaries -- including Ford Motor Credit Co. and Volvo -- and up to $4 billion in cash.
Ford spokeswoman Becky Sanch said it was the first time the company had used assets such as plants to secure financing. Earlier this month, Ford had said it was near an announcement on such a deal.
Ford shares fell 20 cents, or 2.4 percent, to $8.32 in Monday morning trading on the New York Stock Exchange.
Following the transactions, Ford said it will have about $38 billion at year's end to fund automotive operations. That includes cash, cash equivalents, loaned and marketable securities and available credit facilities.
"The additional liquidity should be sufficient to give Ford the ability to fund itself for several years, even with considerable negative cash flow," Rod Lache, an analyst for Deutsche Bank, said in a note to investors.
Dearborn-based Ford lost $7 billion during the first nine months of the year and has said it won't return to profitability until 2009.
The company has offered buyouts and early retirement packages to all 75,000 U.S. production workers and plans to shutter 16 plants to reduce manufacturing capacity to match lower demand for its products as part of its "Way Forward" restructuring plan.
Some Wall Street analysts have questioned why the sale of part of Ford Motor Credit wasn't part of its restructuring update announced in September. Ford has said it didn't plan to sell its finance arm.
At least two analysts said Monday that using assets such as Ford Motor Credit to back the secured loans makes it less likely that Ford will sell the credit arm.
Ford expects the transactions to close before Dec. 31. The senior secured credit facilities will be arranged by Citigroup Corporate and Investment Banking, Goldman Sachs Credit Partners L.P. and J.P. Morgan Securities Inc.
posted by Dreyfuss at 2:40 PM
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