The United Auto Workers healthcare trust on Tuesday plans to auction Ford Motor Co stock warrants for at least $1.27 billion, capitalizing on the automaker's share price rise to fund its retiree plan.
The trust received 362.4 million stock warrants at the end of 2009 as part of the funding for the Voluntary Employee Beneficiary Association, or VEBA. The auction comes as Ford shares have risen sharply above their $9.20 exercise price.
Ford also said on Monday that it would prepay $3 billion of revolving debt in April due to the improved state of the capital markets and the global economy.
The debt prepayment and UAW stock warrants announcements come one day after the automaker announced a deal to sell its Volvo car brand to China's Geely for $1.8 billion. The Volvo sale is expected to close in the third quarter.
Ford's debt prepayment and the Volvo sale plans come as the automaker takes aim to reduce a massive debt load and narrow its focus to three brands: Ford, Mercury and Lincoln.
Ford had automotive debt totaling $34.4 billion at the end of last year, including about $7.9 billion of revolving credit, most of which comes due in 2013.
In the auction, the union's healthcare trust will receive all the proceeds from the sale of the stock warrants, which are similar to equity options, and the trust is seeking a minimum bid of $3.50 each. The warrants expire January 1, 2013.
Ford receives no proceeds from the auction of the stock warrants and the warrants do not change immediately the number of shares of common stock or Class B stock in the automaker.
The automaker had 3.3 billion shares of common stock and 70.8 million shares of Class B stock at the end of February.
The warrants were one of the elements of the agreement between Ford and the UAW to fund the healthcare trust that was created with the 2007 contracts between the union and the three Detroit-based U.S. automakers.
Ford has the option of paying up to half of its VEBA obligations in company stock.
Ford canceled a meeting with sell-side analysts that was scheduled for Tuesday because of the warrant auction.
Ford shares were down 16 cents, or 1.15 percent, at $13.70 on the New York Stock Exchange.
(Reporting by David Bailey; Editing by Lisa Von Ahn, Dave Zimmerman)