April 16, 2024

Ford Motor Company chops off $4 billion worth of debt

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Recently Ford has had some issues with their stock pricing due to investor concern about slow sales within the automotive industry and uncertainty over how the company will pay the UAW’s health care trust fund.

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Ford Logo

The news that came from Dearborn today will most likely calm spirits and even make some brokers jump for joy as Ford will be repaying 4 billion dollars ahead of schedule therefore seriously reducing it’s debt.

Ford made a statement according to which they are making a cash payment of $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust.

This includes about $250 million due under Note A and some $610 million due under Note B. Originally, Ford Motor Company had the option to pay Note B with stock but decided to pay with cash so it doesn’t dilute its stock even further than recent events. I imagine this would really help the situation on Wall Street for the Blue Oval.

Ford Motor Credit Company is also going to be paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2 percent. Adding to that FoMoCo is making a $255 million cash payment to bring current the previously deferred quarterly distributions on the 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.

After today and an April payment of $3 billion on its 2013 revolving credit facility, FoMoCo will have cut its debt by more than $7 billion in the second quarter. Can anybody say that’s less than remarkable?

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