Ford Motor to raise $18 billion in debt

By Our Corporate Bureau | 27 Nov 2006

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Mumbai: Ford Motor Co of US will raise $18 billion in new loans to turn around its loss-making operations in North America. The new debt will include a $8 billion secured credit line which will replace an existing unsecured $6.3 billion loan, Ford said in a statement.

The company also plans to get a new $7 billion secured term loan, and said it expects to complete the financing before December 31.

Dearborn, Michigan-based Ford said the debt will primarily be secured by liens on domestic manufacturing facilities, and the company's other domestic automotive assets, intellectual property, real property, stock of subsidiaries, inter-company payables and notes, and up to $4 billion of domestic cash.

Ford is using its US automotive assets and "all or a portion" of units such as Ford Motor Credit Co. and Volvo as collateral. The new financing would include $3 billion in unsecured funding, which may include notes that can be converted into equity shares, Ford said.

JPMorgan Chase & Co., Citigroup Inc and Goldman Sachs Group Inc. are arranging the financing, Ford said.

In October, Ford had proposed to raise new funding secured by its automotive assets in order to protect its cash position as it closes 16 plants and slashes up to 45,000 jobs.

Ford expected restructuring to reduce its cash to near $20 billion by the end of the year, as it expected cash flow to remain negative in the coming few years.

Ford, which is selling its British luxury brand Aston Martin, is in the process of short-listing bidders. Upon completion of the transaction, Ford expects to have automotive liquidity of approximately $38 billion at year-end 2006.

S&P and Fitch Ratings, meanwhile, is expected to lower Ford's ratings as pledging collateral for a loan would leave bondholders with fewer assets in case of a default. S&P, which has a B rating on Ford's debt, said creditors would be "disadvantaged'' by the new financing plan. Moody's said the proposed loan could add to pressure to reduce its B3 rating.

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