Bloomberg News

Ford Awarded Investment-Grade Yields on $1 Billion of Debt

February 01, 2012

(Adds offering size in headline and first paragraph.)

Jan. 31 (Bloomberg) -- The bond market is awarding investment-grade borrowing costs to Ford Motor Co.’s finance arm on $1 billion of debt today after the No. 2 U.S. automaker reiterated its goal of shedding its junk rankings.

Ford Motor Credit Co. plans to offer five-year senior notes that may yield 4.25 percent, said a person with knowledge of the offering, who declined to be identified because terms aren’t set. That compares with the average yield of 4.24 percent on BBB graded securities, according to Bank of America Merrill Lynch index data, and is lower than the coupon on investment-grade five-year notes issued by SLM Corp., Citigroup Inc. and Entergy Corp. earlier this month, Bloomberg data show.

Ford, based in Dearborn, Michigan, is ranked on the cusp of investment-grade, with a Ba1 rating and positive outlook at Moody’s, and a BB+ grade and stable outlook from Standard & Poor’s. The auto company had CCC grades as recently as 2009. Controller Bob Shanks reiterated on Jan. 27 in a conference call to discuss earnings that Ford has “a strategy to get back to an investment-grade balance sheet, which entails among other things an increase in our unsecured debt versus” asset-backed securities.

“Improved operating results and cash-flow generation along with continued debt reductions should lead to stronger credit ratios over the intermediate term,” Evan Mann, an analyst at New York-based credit research firm Gimme Credit LLC, said in a note on Jan. 27. “The company continues to reiterate its goal of restoring its investment grade rating.”

Ford Offerings

The Ford credit unit on Jan. 4 sold 3.875 percent notes due in January 2015 and 5 percent debt maturing in May 2018, according to data compiled by Bloomberg.

Ford reported last week fourth-quarter profit that fell short of analysts’ estimates as overseas operations dragged down results while a one-time tax gain resulted in the company’s biggest annual profit since 1998.

The company had its 11th consecutive profitable quarter, with net income of $13.6 billion, or $3.40 a share, compared with $190 million, or 5 cents, a year earlier. Excluding one-time items, the profit was 20 cents a share, trailing the 25-cent average estimate of 15 analysts surveyed by Bloomberg. General Motors Co. is the biggest U.S. automaker.

--With assistance from Keith Naughton in Dearborn, Michigan. Editors: Dennis Fitzgerald, Shannon Harrington

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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