US automaker Ford slashes debt by $9.9 bn

US automaker Ford slashes debt by $9.9 bn
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First Published: Tue, Apr 07 2009. 11 42 AM IST
Updated: Tue, Apr 07 2009. 11 42 AM IST
New York: US automaker Ford said on Monday it had slashed $9.9 billion from a debt pile of $25.8 billion under what it called a “successful” debt restructuring exercise.
The exercise is expected to lower annual interest expense by the company of more than $500 million, Ford Motor Company said in a statement.
“This successful debt restructuring, together with previously announced agreements with the United Auto Workers (union UAW), will substantially strengthen Ford’s balance sheet,” the company said.
Shares in Ford shot up 16% to close at $3.77 in New York trade.
Unlike its US rivals, the number-two US automaker says it does not need government aid to cope with collapsing auto sales as the recession bites.
GM, the largest US automaker, and privately held Chrysler are teetering on the brink of bankruptcy despite a multibillion-dollar government rescue.
Last week President Barack Obama’s administration warned that neither had met strict conditions laid out in a $17.4-billion government bailout agreed late last year.
The two companies are now seeking an additional $21.6 billion in public aid, which the government says will only be forthcoming if they submit more realistic plans for their survival.
“By substantially reducing our debt, Ford is taking another step toward creating an exciting, viable enterprise,” said Ford president and chief executive Alan Mulally.
Ratings agency Standard & Poor’s lowered its rating on Ford’s corporate credit to “SD” (selective default) and certain other ratings to “D” (default), and said it expected to issue a new corporate credit rating by mid-April.
“Even with this debt reduction, our preliminary expectation is that the new corporate credit rating will likely not be higher than the ‘CCC´ category initially because we believe Ford’s fundamental business risks remain unchanged for at least the rest of 2009 and perhaps longer: most notably, deteriorating vehicle demand globally and the substantial execution risk of the ongoing restructuring,” S&P credit analyst Robert Schulz said.
Modest signs of hope emerged last week for the troubled US auto industry, as March sales plummeted from a year ago but showed a substantial uptick compared with February.
Overall sales of new vehicles fell 37 percent frmo a year ago but were up 24.5% from February levels, according to market research firm Autodata.
Ford said its March US sales slumped 40.9% from the same month a year ago, but rebounded 30% from February levels.
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First Published: Tue, Apr 07 2009. 11 42 AM IST
More Topics: US | Automakers | Company | Ford | Debt |