Analyst Note
| David Whiston, CFA, CPA, CFE |On Nov. 4, Ford announced more uses for its $31.5 billion of Sept. 30 automotive cash balance in addition to the dividend resumption announced with third-quarter earnings on Oct. 27. Ford’s credit rating is one to two notches below investment-grade by major credit rating agencies and management is trying to fix that by launching a tender offer expiring Dec. 3 for $5 billion of high interest bonds. This includes the $8 billion of bonds issued in April 2020 in response to the pandemic. There are 10 bonds eligible with their outstanding principal totaling about $11.4 billion. Three of the bonds with combined principal of $4.68 billion each pay a coupon between 9% to 9.98% while the other seven bonds’ coupons range between 6.375% and 8.9%. Ford has prioritized the bonds to be tendered and the top two are a 9% bond due April 2025 with $3.5 billion outstanding and 9.625% 2030 notes with $1 billion outstanding, both issued in April 2020 and at that time were highly oversubscribed.