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Ford reduces debt by another $1.9 billion


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Ford reduces debt by another $1.9 billion

November 24, 2010 - 2:52 pm ET

DETROIT (Bloomberg) -- Ford Motor Co., seeking to regain an investment-grade credit rating, reduced its debt by more than $1.9 billion by paying investors in its convertible debt to exchange their notes for shares.

Investors converted $554 million of 4.25 percent senior convertible notes due Dec. 15, 2036, and $1.99 billion of 4.25 percent senior convertible notes due Nov. 15, 2016, the company said today in a statement. The conversions lowered the debt in Ford's automotive operations to $20.9 billion on a pro-forma basis, compared with about $19.8 billion in gross cash.

“These successful conversion offers represent another significant step toward our goal of reducing our automotive debt and improving our balance sheet,” CFO Lewis Booth said in the statement.

Ford has reduced its automotive operations' debt by $12.8 billion this year, lowering annual interest costs by almost $1 billion. The company said today it will have more cash than debt by the end of the year. Moody's Investors Service rates Ford Ba2, the second level below investment grade, and Standard & Poor's rates it B+, two steps lower.

Ford lost its investment-grade ratings in 2005 as rising gasoline prices and falling truck sales led to $30 billion in losses from 2006 through 2008.

The company said it would take a charge of about $960 million in the fourth quarter to account for the conversion offers.

$180 million in savings

Ford gave holders of the 2036 notes 108.6957 shares of common stock and a cash payment equal to $190 for every $1,000 in principal amount, along with accrued and unpaid interest. Ford gave holders of the 2016 notes 107.5269 shares and a cash payment equal to $215 for every $1,000 in principal amount, along with accrued and unpaid interest.

The conversions will save $180 million in annual interest expenses, Ford said. The shares issued in the offer had already been included in the automaker's calculations of earnings per share since the beginning of 2010.

Ford, the only major U.S. automaker to avoid bankruptcy last year, earned $6.37 billion in the first nine months of the year, the most since 1998. New models such as the Fiesta subcompact and redesigned Taurus sedan have helped Ford's U.S. sales rise 21 percent this year, almost twice the market's gain of 11 percent.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101124/OEM/101129937/1424#ixzz16EvcwjhY

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FORD PAYS DEBT DOWN $1.9B, TO BE NET CASH POSITIVE BEFORE 2011

By Mark Kleis

While most Americans were busy enjoying a few helpings of turkey and gravy for Thanksgiving dinner, Ford Motor Company was busy securing gravy of a different kind: the green kind.

Ford has announced that it has eliminated over $1.9 billion of additional Automotive debt through the use of conversion offers to debt holders, which will save the automaker $180 million per year in interest costs. The conversions consisted of $554 million of Senior Convertible Notes due December 15, 2036, as well as $1.992 billion of Senior Convertible Notes due November 15, 2016.

As a net result, Ford will pay $534 million in cash premiums and issue 274 million shares of common stock. Ford also clarified that the additional stock has been included in the automaker’s 2010 diluted earnings per share calculation since the start of the year.

Fiscal progress for 2010

So far in 2010, Ford has reduced its total Automotive debt by $12.8 billion, which the automaker says will result in roughly $1 billion in saved interest costs per year moving forward. Currently, Ford’s debt stands at $20.1 billion, and its cash reserves total $19.8 billion.

“These successful conversion offers represent another significant step toward our goal of reducing our Automotive debt and improving our balance sheet,” said Lewis Booth, Ford executive vice president and chief financial officer. “We had previously said that even without the conversion offers, we expected our Automotive cash to be about equal to Automotive debt by the end of this year, well ahead of our earlier expectations. With the conversion offers, we will be clearly net cash positive by year-end 2010.”

link:

http://www.leftlanenews.com/ford-pays-debt-down-1-9b-to-be-net-cash-positive-before-2011.html

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