Ford expands revolving credit, seeking investment-worthy grade

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Artist's rendition of the Ford Motor Co. corporate logo.

Ford Motor Co. wants an investment-worthy grade. (Photo Credit: Public Domain/Magnus Manske/Wikipedia)

Automotive News reports that Ford Motor Co. will soon be in a position to improve its financial liquidity. The financially hamstrung automaker, which continues to reel from the effects of the auto industry bailouts, announced Thursday that it is expanding and extending its revolving credit facility. Ford’s aim is to improve its balance sheet totals so that it can achieve a credit rating that will draw an increasing number of investors.

Desperately seeking financial flexibility

According to various sources, Ford’s revolving credit will increase from $8.9 billion to $9.3 billion. On Nov. 30, 2015, $9 billion of the $9.3 billion will reach maturity. That’s two years later than the credit would have matured before the expansion, notes Automotive News. The remaining $300 million will mature in 2013 as previously planned.

Ford Motor Co. Treasurer Neil Schloss told the automotive media that the automaker’s expanded level of credit “represents an important source of committed liquidity and financial flexibility for Ford.”

“This is an insurance policy that you hope you never have to use,” Schloss said.

Ford’s 2011 U.S. market share was 16.8 percent, which ranked behind General Motors, at 19.1 percent.

[A Ford is a good car buy]

Propping up the turnaround

Ford’s last helping of revolving business credit before the recent expansion was the massive $23 billion in credit the automaker took in late 2006. The sum was secured at the time by a variety of Ford’s key assets, including rights to the corporate logo. The Financial Times notes that Ford has repaid nearly all of the $23 billion in revolving credit.

Once Ford is able to achieve an investment-grade rating from at least two of the three major corporate credit rating services, the collateral pledged for the 2006 revolving credit distribution will be released back to Ford. Currently, Moody’s Investors Service, Standard and Poor’s Ratings Service and Fitch Ratings all assess Ford Motor Co.’s credit rating just a single step below what stock prospectors consider “investment grade.”

One unsecured credit block, under Ford

Schloss told Automotive News that one clause in the revolving credit expansion agreement Ford now has with banks stipulates that once Ford Motor Co. reaches its investment-grade credit goal, the revolving credit will “shift to an unsecured facility in the near future.” According to Schloss, this “One Ford” plan will “simplify and unify product development and supplies” moving forward.


Automotive News

The Economic Times

Wall Street Journal

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