Capital Markets

Ford’s Debt Buyback Is in Overdrive

Ford Credit doubles its loan repurchase program to catch up to oversubscription.
Stephen TaubMarch 23, 2009

Ford Motor Credit plans to double the amount of cash it is using to buy back senior secured debt because its original tender offer was oversubscribed. As a result, Ford Credit will now use $1 billion to repurchase $2.2 billion worth of debt for 47 cents on the dollar. “We are very pleased with the results to date of our debt restructuring initiatives,” said Neil Schloss, Ford’s treasurer.

In addition, Ford Credit’s repurchase of $1.3 billion of Ford’s unsecured, non-convertible notes has so far resulted in nearly $3.4 billion of the debt being offered for an aggregate purchase price of $1.1 billion, the company added.

The buyback offers are part of a three-step plan announced earlier this month to retire as much as $10.4 billion in debt, noted a Bloomberg report. “With these tenders, we have taken significant steps towards reducing Ford’s long-term debt and strengthening our balance sheet,” commented Schloss. Ford is making bold moves to restructure its debt to avoid having to ask the federal government for bailout money.

The senior loan offer was conducted as a “Dutch auction,” in which the lenders were invited to submit bids to sell their loans within a price range of not less than 38 percent of par or greater than 47 percent of par. All of the senior debt acquired by Ford Credit will be distributed to its parent, Ford Holdings LLC, and forgiven. These distributions by Ford Credit are consistent with its previously announced plans to pay distributions to Ford of about $2 billion through 2010, the company explained.

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