Ford Motors co has trimmed its debt by more than $1.9 billion, by converting some debt to common stock that will be issued Nov. 30, the carmaker said in a statement.
The debt conversion will strengthen company's balance sheet, besides lowering annualized interest costs by about $180 million, it said.
Holders of the convertible securities had until midnight Tuesday to decide whether to participate in the conversion and about 74 percent chose to do so, signaling confidence in the automaker.
Ford will pay $534 million in cash premiums and issue 274 million shares of Ford common stock to convertible note holders. The shares of Ford common stock to be issued have been included in Ford's calculation of diluted earnings per share since the beginning of 2010, the auto major said.
Ford has reduced its automotive debt by $12.8 billion this year, lowering its total annual interest costs by nearly $1 billion.
These successful conversion offers represent another significant step toward our goal of reducing our Automotive debt and improving our balance sheet, said Lewis Booth, Ford executive vice president and chief financial officer.
We had previously said that even without the conversion offers, we expected our Automotive cash to be about equal to automotive debt by the end of this year, well ahead of our earlier expectations. With the conversion offers, we will be clearly net cash positive by year-end 2010.
Ford launched the conversion offers Oct. 26, offering to pay a premium in cash to induce the holders of its outstanding 4.25% senior convertible notes due in 2036 and 4.25% senior convertible notes due in 2016 to convert their notes into Ford's common stock.
The conversion offers each expired at midnight, Nov. 23, at which time, the release said, $554 million of 2036 notes and $2 billion in 2016 notes were tendered for cash and stock.
In light of the redemptions, Ford will pay $534 million in cash premiums and issue 274 million shares of Ford common stock to convertible note holders.