(Reuters) – Ford Motor Co FN On Friday, $ 8 billion was raised from corporate debt investors to shore up its cash reserves as the coronavirus outbreak hit vehicle sales and production, causing an estimated loss of around $ 2 billion. dollars for the first quarter.
The Dearborn, Mich., Company, which lost its investment grade status in March, raised new funds with a three-part debt offer, according to a regulatory filing.
Investors said Ford took advantage of the US Federal Reserve’s decision last week to back debt offers from companies that lost quality credit ratings after the COVID-19 crisis accelerated in the United States. United, the International Financing Review reported on Friday.
“Today’s deal is a good sign of growing confidence around an improving market environment for liquidity as well as more promising views regarding the economic outlook,” said Dan Mead, head of the investment grade syndicate at Bank of America Securities, which was one of the lead banks on the Ford deal.
In an environment where interest rates on cash savings are close to zero, Ford will pay investors interest between 8.50% and 9.625% on new debt securities.
There was about $ 40 billion in investor demand for the three debt packages, according to a person familiar with the matter.
Ford previously withdrew more than $ 15 billion in revolving lines of credit to overcome the pandemic, which forced the shutdown of its North American and European factories over the past month.
Separately, General Motors Co GM.N disclosed in a regulatory filing that he had entered into a 364-day revolving credit agreement for $ 1.95 billion. The automaker said it has allocated the line of credit for the exclusive use of its financial services business. (bit.ly/3ezBDoy)
Ford said on Friday it had to put in additional collateral for earlier loans – not tickets sold on Friday – because it failed to maintain investment grade status. He suspended his dividend for the quarter.
Stopping the cash flow and restarting profitable operations in Europe and North America will be essential for Ford in the months to come. The company told investors ahead of the bond deal on Friday that in the absence of new funding and a production restart, it had cash to last until the end of the third quarter.
Now Ford has more wiggle room financially, and federal and state officials said this week they expected coronavirus lockdowns to begin to ease, possibly allowing auto factories to start over again. build vehicles early next month.
Still, the company has taken a hard hit from the pandemic at a time when it was already grappling with a difficult restructuring effort that began more than two years ago. Ford’s vehicle sales to dealerships fell 21% in the first quarter from a year earlier.
Only Ford’s joint ventures in China, where the pandemic has receded, are currently producing vehicles, and dealerships have resumed work there.
Separately, Ford has warned that its production of high-priced versions of pickup trucks and sport utility vehicles could be affected due to tornado damage earlier this week at parts supplier BorgWarner. BWA.N South Carolina plant.
The BorgWarner plant manufactures transfer cases for some of Ford’s most profitable vehicles, such as large four-wheel-drive F-series pickups and large sport utility vehicles.
(This story corrects to clarify that Ford has put in place guarantees for previous loans, not for the new debt issued on Friday, in the ninth paragraph)
Reporting by Rachit Vats and Ankit Ajmera in Bengaluru and Joshua Franklin in New York; Editing by Aditya Soni, Jonathan Oatis, Shinjini Ganguli and Daniel Wallis