Ford takes advantage of high-grade status with $1.5bn bond
NEW YORK, June 7 (IFR) - Buoyed by a push to investment-grade status by Moody's last month, Ford Motor Credit on Thursday took full advantage of positive sentiment in the US investment grade market, raising a healthy $1.5 billion from a five-year trade.
The Baa3/BB+/BBB- rated issuer, the financing arm of the second-biggest US automaker Ford Motor Company, has been a crowd favourite this year. That's partly because of widespread expectations that it would be rescued from a seven-year spell in junk status by upgrades from the international rating agencies.
Fitch was the first to upgrade the credit in April.
In May, the company reached a new milestone when it pierced the 3.00% coupon level for the first time on a $1.25 billion three-year issue. The offering priced with a 2.75% coupon to yield 2.75% or 237.8 basis points (bp) over comparable Treasuries.
Moody's followed with an upgrade last month and Ford returned to the market on Thursday.
Any concerns that a Ford bid was already priced in were dispelled when the bond issue found a strong investor response, allowing the issuer to size it at $1.5 billion.
The bonds were offered with initial price thoughts of 262.5bp over Treasuries which later tightened to price guidance of 240bp area.
In the end, the deal priced at a yield spread of 230bp, showing the bid for Ford remains solid. The coupon was set at 3% while the yield was at 3.008% for a reoffer price of 99.9630.
Bank of America Merrill Lynch, Credit Suisse, HSBC, JP Morgan and RBC were the bookrunners.
The robust demand for Ford's latest bonds was helped by relatively strong secondary market performance of its outstanding bonds.
Ford's 4.25% 2017s rose from 102.50 just before it received its investment grade rating from Moody's on May 23 to 106 just before today's announcement of the new offering.
Parent company Ford Motor Co posted a higher-than-expected profit for the first quarter as the strength of its core North American unit offset weak results overseas, particularly in Europe, and higher taxes.
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