US:Ford raises borrowing plan - Ford Forums

Stacy94PGT · 12-06-2006, 19:59

Ford raises borrowing plan

Amy Wilson | Automotive News

Ford Motor Co. is increasing a line of revolving credit, boosting the amount of money the automaker is borrowing to finance a restructuring to $22 billion to $23 billion.

In a filing with the Securities and Exchange Commission, Ford said today it is increasing the amount of a secured revolving credit facility to roughly between $10.5 billion and $11.5 billion from $8 billion.

Ford also said in a filing that it is willing to pledge its assets in Mazda Motor Corp. That could happen if Ford decides to borrow an additional $2 billion through a pre-existing lending arrangement.

That $2 billion is extra borrowing capacity Ford "had there on the side," company spokesman Oscar Suris said. It is in addition to the $18 billion target of the financing package announced last week.

If Ford taps the $2 billion, it agrees to use its Mazda holdings as added collateral for all of its senior secured debt or to decrease its commitments under the secured credit line or term loan.

"We've agreed to those contingencies, so that we have that additional funding flexibility," Suris said.

Suris said Ford is increasing the size of the revolving credit line only because of the "overwhelming support" by lenders.

"This is not a reflection of us calculating we need even more now," Suris said. "Overall, what we're seeking is strong liquidity that gives us financial flexibility."

Ford on Wednesday also increased the size of a convertible note sale to $4.5 billion, from $3.0 billion, according to market sources familiar with the sale. That offering is expected to be priced later today, the sources said.

Reuters contributed to this report.

Stacy94PGT · 12-07-2006, 05:00

Ford could borrow up to $23B

Company said increased financing capacity comes from strong market demand for secured offerings.

Bryce G. Hoffman / The Detroit News

DEARBORN -- Ford Motor Co. is super-sizing the financing package it announced last week and now plans to increase its borrowing capacity by more than $5 billion to as much as $23.5 billion.

Ford on Wednesday cited "overwhelming support by lenders" as the reason behind the move, but investor worries about the automaker's debt burden drove its shares down 4.2 percent.

Last week, the struggling automaker said it would seek $18 billion in new financing to help cover the cost of its North American restructuring plan and buy time for a turnaround. A big chunk of that was to come in the form of an $8 billion revolving credit facility secured by all of Ford's U.S. assets. On Wednesday, Ford said it now hoped to stretch that to between $10.5 billion and $11.5 billion.

Ford spokesman Oscar Suris said the move was in response to strong demand for Ford's secured offering in the capital markets. He said it does not reflect any fundamental change in Ford's outlook.

"We haven't raised our target of $18 billion," Suris said. "This just gives us additional flexibility."

Last week, Ford said it expects to burn through $17 billion from 2007 through 2009 as it moves to idle factories and cut factory jobs to match declining demand for its cars and trucks.

The same strong demand from investors has prompted Ford to increase the amount of a planned convertible note offering from $3 billion to $4.5 billion, according to a SEC filing late Wednesday. The offering could increase to $5 billion if it's oversubscribed.

Analyst Bradley Rubin of BNP Paribas in New York said Ford is smart to take advantage of the interest in its debt offerings.

"I think this is the last time Ford Motor Co. is going to be able to go to the capital markets before the war with the UAW starts," he said, referring to next year's contract negotiations with the United Auto Workers, which he said could lead to a strike if the union balks at the concessions Ford is likely to demand. "They're going to need a lot of cash."

However, expanding its secured credit limit puts more pressure on Ford's unsecured debt. That prompted Fitch Ratings to cut Ford's senior unsecured debt rating from "B" to "B-" Wednesday, pushing it six levels below investment grade.

Ford did say last week that the size of each part of its financing deal would depend on market conditions.

Some analysts speculated that the company purposely set its borrowing target low to generate more interest in its offering.

Though this is not the first financial crisis Ford has faced in its long history, it is the first time the company has put its assets -- its factories, offices and intellectual property -- up as collateral.

In a related development Wednesday, Ford said that a previously negotiated $2 billion unsecured financing option would now have to be secured by the automaker's stake in Japan's Mazda Motor Corp., unless Ford reduces other debt obligations.

Suris said Ford does not plan to secure the loan with Mazda's assets. The $2 billion credit deal predates the $18 billion financing package announced last week.

Shares in Ford fell 32 cents a share Wednesday to close at $7.36 after a day of intense trading. But most analysts say they understand the rationale behind Ford's recent financing moves.

"The company's market share and operating results are under pressure, and its turnaround plan is in its early stages," said Dave Klein of Credit Derivatives Research, in a report Tuesday. "It is now time to execute on its plan."

The automaker lost $7 billion during the first nine months of the year and has said it won't return to profitability until 2009.