Ford Motor Company to Reduce Debt by $3 Billion

Strategic Insights -

Ford Motor Company has announced plans to redeem its $2.98 billion aggregate principal amount of 6.5% junior subordinated convertible debentures, held by Ford Motor Company Capital Trust II, resulting in a $3 billion reduction in automotive debt. This move is expected to lower annualized interest costs by about $190 million. Additionally, Ford will take a $60 million charge related to the redemptions in the first quarter.

Key Takeaways:

  • Ford plans to redeem $2.98 billion of its 6.5% junior subordinated convertible debentures, held by Ford Motor Company Capital Trust II.
  • The redemption will result in a $3 billion reduction in automotive debt.
  • Annualized interest costs will be reduced by about $190 million.
  • Ford will take a $60 million charge related to the redemptions in the first quarter.
  • The company will redeem for cash all of its outstanding 6.5% cumulative convertible trust preferred securities on March 15.
  • Holders of these securities can convert them into nearly 2.9 shares of common stock prior to March 15.
  • The redemption will not impact common stock shareholders.

Statistics:

  • $2.98 billion: Aggregate principal amount of 6.5% junior subordinated convertible debentures being redeemed.
  • $3 billion: Reduction in automotive debt resulting from the redemption.
  • $190 million: Reduction in annualized interest costs.
  • $60 million: Charge related to the redemptions in the first quarter.
  • 6.5%: Interest rate on the junior subordinated convertible debentures.
  • 2.9: Number of shares of common stock that can be received in exchange for each trust preferred security.

Sources:

  • Ford Motor Company
  • Bloomberg