DETROIT (Reuters) - Ford Motor (F.N) said on Monday it had raised the amount of secured debt it is buying back under a broad plan to slash its automotive debt by more than 40 percent and reduce annual interest costs.
Ford, which has not sought emergency U.S. government aid, is powering ahead of domestic rivals General Motors Corp (GM.N) and Chrysler in bolstering its finances amid the global automotive downturn.
The automaker could retire up to $11.3 billion of automotive debt under buybacks launched earlier in March, or nearly 44 percent of that $25.8 billion of outstanding debt.
Ford said an offer through its finance arm to buy back senior secured term loan debt was oversubscribed and it had doubled the cash available for the offer to $1 billion to buy back $2.2 billion of debt at 47 cents on the dollar. Ford had originally planned to buy back about $1.3 billion of the debt.
The debt restructuring plan also includes a cash tender offer for Ford’s unsecured, nonconvertible debt securities and a conversion offer for its 4.25 percent senior convertible notes due December 15, 2036. Both remain open to April 3.
“It’s kind of strange in that bondholders are voting to take 47 cents on the dollar, almost a no-confidence vote for Ford’s longer term prospects, and that is actually a good thing for Ford and they are able to recapitalize more cheaply,” said Pete Hastings, fixed income analyst at Morgan Keegan.
Ford, which aims to complete a turnaround plan without seeking emergency government loans, borrowed $23 billion in late 2006 secured with most of its remaining assets including the familiar blue oval logo.
The buyback program will free up some of Ford’s assets at a time when GM and Chrysler both are required to reduce their debt structures as part of the government bailout.
Ford also has moved ahead in reducing its debt, while discussions between GM and its bondholders remain stalled.
The debt restructuring by Ford is just one of several steps the automaker has taken to bring costs down.
Ford was the first in reaching a deal with the United Auto Workers union on contract changes to lower its labor costs and is already leading Chrysler LLC, about 80 percent controlled by Cerberus Capital Management CBS.UL and GM in the effort to reduce debt on its balance sheet.
The broad debt restructuring for Ford includes offering creditors cash and new shares as it looks to slash financing costs at a time of plunging sales and tight credit.
Separately, the automaker’s cash tender offer for its unsecured, nonconvertible notes has resulted in nearly $3.4 billion principal amount of notes being tendered so far.
“With these tenders, we have taken significant steps toward reducing Ford’s long-term debt and strengthening our balance sheet,” Neil Schloss, the company’s treasurer, said in a statement.
Ford shares were up 8 cents at $2.83 on the New York Stock Exchange on Monday afternoon.
Reporting by Poornima Gupta, editing by Dave Zimmerman, Lisa Von Ahn and Matthew Lewis