Ford Motor Co. (F) Monday said that it successfully completed its debt restructuring initiatives that will reduce automotive debt by $9.9 billion from $25.8 billion as of December 31, 2008. Major components of the company's debt restructuring initiatives, announced on March 4, were a conversion offer by Ford, and a term loan offer and a notes tender offer by Ford's financial services arm Ford Motor Credit. The company, which is struggling hard amid a sharp drop in vehicle demand, had planned to retire $10.4 billion debt through these initiatives.
Ford said that it and Ford Motor Credit would use $2.4 billion in cash and 468 million Ford common shares in total to reduce the outstanding automotive debt. The automaker also said that the initiatives would reduce its annual cash interest expense by more than $500 million based on current interest rates. The conversion offer and the notes tender offer expired on April 3, while the expiry of term loan offer was on March 19.
In the conversion offer, Ford offered to pay a premium in cash to induce the holders of any and all the $4.88 billion principal amount outstanding of its 4.25% Senior Convertible Notes due December 15, 2036 to convert the Convertible Notes into Ford's common shares. As of the expiration date, approximately $4.3 billion principal amount of Convertible Notes were validly tendered and accepted for purchase. Ford said that this will lead to the issuance of about 468 million Ford common shares in total and the payment of an aggregate of $344 million in cash, along with the applicable accrued and unpaid interest on such Convertible Notes, on the expected settlement date of April 8.
Note holders who validly tendered and did not withdraw their Convertible Notes by the expiration date and whose Convertible Notes were accepted for purchase will receive 108.6957 shares of Ford's common stock, $80 in cash and the applicable accrued and unpaid interest for each $1,000 principal amount of the Convertible Notes converted. Ford said it will use $344 million to pay a cash premium to Convertible Note holders who validly tendered. Following the settlement of the conversion offer, approx. $579 million aggregate principal amount of Convertible Notes will remain outstanding.
Ford Motor Credit's notes tender offer was $1.3 billion cash tender offer for certain of Ford's unsecured, non-convertible debt securities, or Notes. Ford Motor Credit today said that as of the expiration date, about $3.4 billion principal amount of the Notes were validly tendered and accepted for purchase. This will result in an aggregate purchase price of about $1.1 billion for the Notes, to be paid by Ford Credit on the expected settlement date of April 8. Upon settlement, such Notes will be transferred from Ford Credit to Ford in satisfaction of certain of Ford Credit's tax liabilities to Ford. After the settlement of the notes tender offer, approximately $5.5 billion aggregate principal amount of the Notes will remain outstanding.
Further, the term loan offer was a $500 million cash tender offer by Ford Credit for Ford's senior secured term loan debt. Ford Credit said on March 23 that the term loan offer was over-subscribed. Based on the tenders received, Ford Credit increased the amount of cash used to $1 billion from $500 million to purchase $2.2 billion principal amount of Ford's term loan debt at a price of 47% of par. This transaction was settled on March 27 and Ford Credit distributed the term loan debt to its immediate parent, Ford Holdings LLC. The distribution of the term loan debt is consistent with Ford Credit's previously announced plans to pay distributions of about $2 billion to Ford through 2010. According to the company, about $4.6 billion aggregate principal amount of the term loan debt remains outstanding.
As previously announced, Ford has elected to defer future interest payments related to the 6.50% Cumulative Convertible Trust Preferred Securities of Ford Motor Company Capital Trust II, which will result in the deferral of $184 million in interest on the Trust Preferred Securities annually.
Ford, the only automaker among the big three U.S. automakers that didn't seek part of the U.S. government's $17.4 billion auto-bailout fund, is taking several measures including plant closures, selling of its units, workforce reduction, and pay cuts for executives to strengthen its balance sheet and maintain funding. For the recently closed fourth quarter, Ford reported a wider loss of $5.9 billion. For the month of March, the Dearborn, Michigan-based company's U.S. sales were down 40.9%, the sixteenth consecutive decline of monthly U.S. sales for the company.
F is trading at $3.76, up $0.50, on a volume of 102.63 million shares.
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