Wednesday March 4, 11:45 PM
Ford to buy back debt, swap it for stock amid restructuring
CHICAGO (AFP) - Ford Motor Co. announced plans Wednesday to reduce the cost of servicing its massive debt by buying back some bonds and swapping others for stock.
Ford is offering to spend up to 2.2 billion dollars in order to retire up to 10.4 billion dollars in debt, spokesman Mark Truby said.
Ford, which has lost nearly 30 billion dollars in the past three years, currently has about 25 billion dollars in outstanding debt.
The automaker is in the midst of a major restructuring as it struggles to slash costs in the wake of a collapse in auto sales, amid a broad economic crisis.
Ford has repeatedly said it has sufficient cash on hand to survive the downturn without government aid, unlike rivals General Motors (NYSE: GM - news) and Chrysler which last month asked the US Treasury for billions more to keep their operations afloat.
"The debt restructuring plan we are announcing today is a critical step in Ford's overall transformation," Ford President and CEO Alan Mulally said in a statement.
"We are continuing to work with all of our stakeholders -- including employees, dealers and suppliers -- to secure Ford's future in this difficult economic environment."
Ford's financial arm, Ford Motor Credit, will spend up to 1.8 billion dollars in buying back Ford's bonds at between 30 and 50 percent of their face value, Truby told AFP.
Those bonds are currently trading at between 20 and 30 percent of their face value.
Ford will spend up to 400 million dollars on cash premiums to induce bond holders to convert up to 4.88 billion dollars in debt for shares of Ford's common stock.
Ford has also recently reached a tentative agreement to meet up to 50 percent of its outstanding obligations to a trust fund for retiree health care benefits with stock instead of cash, Ford said.
Ford owed 13.2 billion dollars to the fund as of August 29.
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