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NINETY EIGHT REGENCY

Ford pays off $4B in debt with cash

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Ford pays off $4B in debt with cash

Alisa Priddle / The Detroit News

Ford Motor Co. this morning said it is reducing its debt by more than $4 billion with $3.8 billion of the payment being used to meet its obligation to the United Auto Workers health-care trust fund.

The automaker, with the help of Ford Motor Credit Co., made today's payment in cash, foregoing the option to meet some of its payment to the Voluntary Employees' Beneficiary Association in stock.

Breaking down the $4 billion, Ford has paid the $860 million to the VEBA that was due today. Payment was made in cash: $250 million for Notes A and $610 million for Notes B. Ford could have chosen to make the payment for Notes B in the form of stock, but the automaker chose to pay in cash instead and receive a discount as a result.

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Ford and Ford Credit are paying $2.9 billion to pay off Notes A in full and receiving a 2 percent discount for paying in cash.

The payment to the VEBA was made ahead of schedule, and the automaker has negotiated the ability to make more frequent prepayments on the remaining $3.6 billion owing on Notes B over the next three years.

Ford's VEBA obligation was more than $7 billion when it was established in 2008 to shift health-care obligations from the automaker to the UAW. The agreement was amended last year to create Notes A and B, allowing Ford to use stock to make payments under Note B.

The payment arrangements made today were signed with the VEBA trustee last Friday.

"We are very pleased with this transaction, which continues the process of diversifying the trust's assets at very attractive values and assists the thousands of Ford retired employees, their families and survivors and others who look to the trust to fund their retiree health benefits," said Samuel Halpern, president of Independent Fiduciary Services Inc., the independent fiduciary and investment manager for the UAW Retiree Medical Benefits Trust.

Ford said the payments reflect the confidence the company has in its plans that remain on track to continue to deliver profits. Second-quarter results will be released at the end of July.

Additionally, Ford is making a $255 million cash payment on other securities.

The automaker had $34 billion in debt at the end of the first quarter -- a figure that now is down to $27 billion.

With a $3 billion revolver payment made in April, the company has reduced debt by $7 billion in the second quarter alone. The reduction will save Ford more than $470 million in annual interest.

"Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future," Ford President Alan Mulally said.

"We expect to continue to improve our balance sheet as we deliver on our plan," Mulally said. "Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks.

"We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the trust for their health care benefits," Mulally said.

Ford distinguished itself in the minds of many consumers when it did not take advantage of government bailouts when its Detroit rivals General Motors Co. and Chrysler Group LLC did. But by not following Chrysler and GM into debt, Ford was not able to use Chapter 11 to shed some of its legacy debt.

While the VEBA owns equity in both Chrysler and GM, it does not have equity in Ford.

The $1.3 billion contribution by Ford Credit does not affect the lending arm's liquidity.

From The Detroit News: http://www.detnews.com/article/20100630/AUTO01/6300393/1148/Ford-pays-off-$4B-in-debt-with-cash#ixzz0sLUBuT8G

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Ford to repay $4B more in debt

By Tom Krisher, AP Auto Writer

DETROIT — Ford Motor, the only Detroit automaker to avoid bankruptcy protection, said Wednesday it will reduce its huge debt by another $4 billion as it continues to show signs of financial strength.

The automaker will pay $3.8 billion in cash to a United Auto Workers trust fund that pays retiree health care bills, and it will pay out $255 million in dividends on preferred securities that had been deferred as the automaker worked its way through financial troubles.

PHOTO GALLERY: How many Fords made best-seller list in May?

Ford (F) CEO Alan Mulally said in a statement that the payments are another sign of confidence that the company's restructuring plan is working.

"We expect to continue to improve our balance sheet as we deliver on our plan," Mulally said. "Our business results make it possible to take these actions while still accelerating the investments we are making in our business."

The automaker said the actions combined with a $3 billion debt payment in April will reduce its total debt to around $27 billion from $34 billion at the end of the first quarter.

Ford was forced to mortgage its factories and even its blue oval logo to borrow more than $23 billion in 2006 and 2007. But the move helped it avoid bankruptcy protection, unlike Chrysler Group and General Motors.

Recently Ford has reported sales gains and four straight quarterly profits. It made $2.1 billion in the first quarter, helped by higher transaction prices for its cars and trucks, which have been getting high quality ratings from third-party groups such as Consumer Reports magazine and J.D. Power and Associates.

link:

http://www.usatoday.com/money/autos/2010-06-30-ford-debt_N.htm

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Ford payments will cut debt by $4 billion, to $27 billion

Shares rise 5.4 percent in early trading

Jamie LaReau

Automotive News -- June 30, 2010 - 9:20 am ET

DETROIT -- Ford Motor Co. said today that it will reduce its current debt load by about $4 billion.

The company will pay $3.8 billion owed to the UAW Retiree Medical Benefits Trust ahead of schedule, Ford said in a statement. The automaker also will pay $255 million in dividends on preferred securities starting July 15. Ford had deferred those quarterly distributions as it struggled to get back to profitability.

Ford shares, as of 10:17 a.m. EDT, rose 5.4 percent to $10.42 on the New York Stock Exchange.

At the end of the first quarter, Ford owed about $34 billion in automotive debt as the result of $23 billion in loans the company took out in 2006 to fund its turnaround. Today's payment will reduce the debt owed to about $27 billion.

Ford defied the expectations of analysts who had said the automaker would pay a portion of its obligation in stock because the second-largest U.S. automaker's shares have been trading down since closing at a 52-week high of $14.46 on April 26.

“We expect to continue to improve our balance sheet as we deliver on our plan,” CEO Alan Mulally said in a statement. “Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks.”

Ford said it has reduced its debts by more than $7 billion during the second quarter.

“The total debt reduction will save Ford more than $470 million in annual interest expense,” the statement said.

Response to bear market

Ford has raised more than $5.7 billion since the second quarter of 2009 through several equity and equity-linked offerings.

Ford's news today followed a rough day yesterday on Wall Street for the automaker -- and most investors. Ford stock erased its 2010 gains amid concerns about sluggish auto sales and speculation about how the company would make its payment to the UAW health care fund.

Ford shares yesterday fell 55 cents, or 5.3 percent, to $9.88 on the New York Stock Exchange. Earlier, the shares fell to $9.75, the lowest intraday price since December, and are down 1.2 percent this year.

Ford's fall was larger than the 2.7 percent decline in the Dow Jones industrial average and the 3.1 percent decline in the Standard & Poor's 500 index.

Ford Americas President Mark Fields said last week that the U.S. auto market has “flat-lined” since the third quarter of last year.

Ford, the only major U.S. automaker to avoid bankruptcy, reversed three years of losses by posting $2.7 billion in net income last year. It reported an additional $2.1 billion in net income during the first quarter.

Ford's U.S. sales are up 30 percent this year on gains from new models such as the Fusion hybrid and the redesigned Taurus sedan. Mulally has said the automaker will be “solidly profitable” this year.

Bloomberg contributed to this report

PRESS RELEASE: Ford Takes Action to Further Strengthen Balance Sheet by Reducing Debt by $4 Billion

DEARBORN, Mich., June 30, 2010 /PRNewswire via COMTEX/ --

-- Ford to pay $3.8 billion in cash to the UAW Retiree Medical Benefits Trust by making scheduled debt payments due on Notes A and B held by the trust and paying the entire remaining balance of Note A ahead of schedule

-- Company to pay $255 million of previously deferred quarterly distributions on 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II; quarterly distribution payments will resume starting with the payment due on July 15, 2010

-- Ford obtains more flexibility over a three-year period to pre-pay all or a portion of the remaining $3.6 billion outstanding principal amount of Note B

-- These actions, combined with an April payment of $3 billion on its 2013 revolving credit facility, reduced Ford's debt by more than $7 billion during the second quarter; the total debt reduction will save Ford more than $470 million in annual interest expense

Ford Motor Company (NYSE: F) today is reducing its debt by more than $4 billion - primarily by retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule. The company said it is taking the action to further strengthen its balance sheet as it gains momentum on its One Ford plan and remains on track to deliver solid profits and positive Automotive operating-related cash flow this year.

Ford is making scheduled payments in cash totaling about $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust - including about $250 million due under Note A, and $610 million due under Note B. Ford had the option to pay Note B with cash or Ford stock but agreed to pay with cash. In addition, Ford and its subsidiary, Ford Motor Credit Company, are paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2 percent.

Separately, Ford is making a $255 million cash payment to bring current previously deferred quarterly distributions on the 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.

With today's actions and an April payment of $3 billion on its 2013 revolving credit facility, Ford will have reduced its debt by more than $7 billion in the second quarter. The second quarter debt reduction will save Ford more than $470 million in annual interest expense.

"Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future," said Ford President and CEO Alan Mulally. "We expect to continue to improve our balance sheet as we deliver on our plan. Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks.

"We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the Trust for their health care benefits," Mulally said.

The second quarter debt reductions are in addition to a series of actions Ford has taken since early 2009 to improve its balance sheet. These include completing transactions in spring 2009 that reduced Ford's Automotive debt obligations by $10.1 billion, and raising more than $5.7 billion since the second quarter of 2009 through several equity and equity-linked offerings.

The VEBA Trust Note Obligations

Pursuant to a March 2008 settlement agreement, the UAW Retiree Medical Benefits Trust was created to assume responsibility for providing retiree health care benefits to eligible Ford-UAW employees and their dependants, the cost of which would be funded with assets contributed by Ford.

The settlement was amended in March 2009 to create Notes A and B, which smoothed Ford's payment obligations and gave Ford the option to use Ford stock to make payments under Note B. On Dec. 31, 2009, Ford completed the transfer of assets, including Notes A and B, to the UAW Retiree Medical Benefits Trust, and the trust assumed the retiree health care liabilities.

June 2010 Agreement

The payments made today result from an agreement last week between Ford and the UAW Retiree Medical Benefits Trust that includes:

-- Ford making the scheduled payments on Notes A and B in cash totaling about $860 million.

-- Ford and Ford Credit purchasing for cash the remaining $2.96 billion outstanding principal amount of Note A at a price of 98 percent, or $2.9 billion, of which $1.6 billion is being paid by Ford and $1.3 billion is being paid by Ford Credit. Ford Credit intends to deliver to Ford the portion of Note A that it is purchasing from the UAW Retiree Medical Benefits Trust to satisfy existing intercompany tax liabilities it owes to Ford.

-- Subject to regulatory approval, the UAW Retiree Medical Benefits Trust is providing Ford a three-year right beginning in July 2010 whereby Ford has the flexibility to pre-pay for cash, periodically during each year, all or a portion of the remaining $3.6 billion outstanding principal amount of Note B at a 5 percent discount for purchases made prior to 2012 and at a 4 percent discount for purchases made after 2011. Previously, Ford could pre-pay Note B once a year at par.

"We are very pleased with this transaction, which continues the process of diversifying the Trust's assets at very attractive values and assists the thousands of Ford retired employees, their families and survivors and others who look to the Trust to fund their retiree health benefits," said Samuel W. Halpern, president of Independent Fiduciary Services, Inc., the independent fiduciary and investment manager for the UAW Retiree Medical Benefits Trust.

Repayment and Reinstatement of Distributions on Trust Preferred Securities

Ford also announced today that it is paying in cash to the trustee all accrued distributions previously deferred totaling $255 million on the Trust Preferred Securities, and that it intends to resume making quarterly distribution payments starting with the payment due on July 15, 2010.

The accrued distributions will be paid by the trustee on July 15, 2010, to the holders of record of the Trust Preferred Securities on June 30, 2010. Distributions on the Trust Preferred Securities had been deferred in accordance with their terms since April 15, 2009.

Ford said its liquidity and ability to generate positive cash flow are sufficient to warrant reinstatement of the distributions on the Trust Preferred Securities.

Read more: http://www.autonews.com/article/20100630/OEM/100639995/1142#ixzz0sLikA2kA

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FORD TO CUT DEBT BY $4B BY PAYING UAW FUND

By Andrew Ganz

Ford Motor Company says that it will reduce its debt by paying $3.8 billion to the UAW’s Retiree Medical Benefits Trust by the end of the day today.

The automaker’s $3.8 billion payment will reduce its debt to the fund to around $3.6 billion. Ford will also pay $255 million in deferred dividend payments to the healthcare fund.

Along with other payments made earlier this year, Ford says that it has reduced its overall debt by about $7 billion to around $27 billion. That’s still a high number, but the automaker is confident that it is on the right path.

“Our One Ford plan to profitably grow our business is working, and we are increasingly confident about our future,” Ford CEO Alan Mulally said in a statement released to the media. “We expect to continue to improve our balance sheet as we deliver on our plan.”

Mulally still says that the automaker will be “solidly profitable” in 2010.

link:

http://www.leftlanenews.com/ford-to-cut-debt-by-4b-by-paying-uaw-fund.html

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Ford's $4B repayment boosts faltering stock

Alisa Priddle / The Detroit News

Ford Motor Co.'s $4 billion cash payment to reduce its debt caused its stumbling stock to rebound Wednesday, and signaled its intention to be financially competitive with crosstown rivals who shed their debt through bankruptcy.

By not following Chrysler and GM into Chapter 11, Ford was unable to unload some of its legacy debt. At the end of the first quarter of this year, Ford had $34 billion in debt, more than double GM's $14 billion to $15 billion and Chrysler's $3.8 billion. But Wednesday's action, plus a $3 billion payment in April, pared Ford's debt to $27 billion. The reduction will save the Dearborn automaker more than $470 million in annual interest and, along with its strong product lineup, reassures Wall Street of its financial viability.

"Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future," said Ford President Alan Mulally.

"We expect to continue to improve our balance sheet as we deliver on our plan.

"Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business."

The debt reduction "provides a level of comfort to Wall Street and eliminates one of the drags on their performance," said Rebecca Lindland, director of auto industry research with IHS Automotive in Lexington, Mass.

"Ford is doing well in many respects, but everyone points to their debt as a big lag on performance, dragging their stock price down."

Of Wednesday's $4 billion payment, $3.8 billion went to reduce its obligation to the United Auto Workers health care trust fund.

Ford was obligated to make an $860 million payment to the fund, called a Voluntary Employees' Beneficiary Association or VEBA, by Wednesday. The automaker paid $250 million and $610 million in cash for two notes, even though the second obligation could have been paid in stock.

It also decided to retire one of the notes, paying an additional $2.9 billion with the help of Ford Motor Credit Co.

Ford has negotiated the right to make more frequent prepayments in the future on the $3.6 billion it still owes the health fund.

In addition to its VEBA payment, Ford made a $255 million cash payment on other securities.

Investors liked what they saw in the company's actions Wednesday, and its stock closed at $10.08, up 20 cents from Tuesday's $9.88 -- but still a far cry from the 52-week high of $14.46 on April 26.

Ford shares took a hit this week amid investor fears the VEBA obligation would be paid in stock, a move Lindland said could have resulted in a double-digit hit in today's volatile market.

"One of their priorities is to protect that stock," she said.

A sign of optimism

Ford said the payments reflect its confidence that it remains on track to continue delivering profits. Second-quarter results will be released at the end of July.

The automaker's U.S. sales are up more than 30 percent this year; the industry as a whole is only up 17 percent. June sales reports are due today and while they are expected to be up substantially from June 2009, analysts are forecasting a decline from the previous month.

Ford "is the darling of the auto industry these days," said Charles Chesbrough, senior economist for IHS in Northville, who expressed surprise the automaker would part with cash, given its own forecast of a flat U.S. sales market.

"It shows they are optimistic on their own outlook."

Lindland said Ford's move also helps prepare for the first real stock market competition, with GM expected to make an initial public stock offering yet this year.

"Ford has no competition in that regard right now," she said.

Moody's Investors Service said Wednesday it is maintaining its ratings of Ford and Ford Credit in light of the payments.

200,000--plus beneficiaries

Ford's VEBA obligation was more than $7 billion when it was established in 2008 to shift health care obligations from the automaker to the UAW. The agreement was amended last year to create a second type of note that could be paid in stock.

The VEBA pays health care bills for more than 200,000 retirees and their spouses.

The details of the payment arrangements made Wednesday were finalized and signed with the VEBA trustee Friday.

"We are very pleased with this transaction, which continues the process of diversifying the trust's assets at very attractive values and assists the thousands of Ford retired employees, their families and survivors and others who look to the trust to fund their retiree health benefits," said Samuel Halpern, president of Independent Fiduciary Services Inc., the independent fiduciary and investment manager for the UAW Retiree Medical Benefits Trust.

From The Detroit News: http://detnews.com/article/20100701/AUTO01/7010353/1148/auto01/Ford-s-$4B-repayment-boosts-faltering-stock#ixzz0sREqtyqJ

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