Monday April 13, 09:01 PM
S&P upgrades Ford credit ratings
NEW YORK (AFP) - Ratings agency Standard & Poor's Monday said it had raised Ford's credit ratings to "CCC+" from "SD," or selective default, after the US automaker announced it had slashed its debt pile.
However, S&P said the outlook for Ford is negative, signaling the ratings could be lowered.
S&P said the "the upgrade reflects our evaluation of Ford's creditworthiness following the company's completion of what we considered to be a distressed debt exchange."
A week ago Ford announced it had slashed 9.9 billion dollars from a debt pile of 25.8 billion dollars under what it called a "successful" debt restructuring exercise that would lower annual interest expense by more than 500 million dollars.
After the April 6 debt announcement, S&P had downgraded the embattled automaker's credit rating to "SD" from "CCC+" but said a new rating would be forthcoming this month.
S&P said its evaluation of the debt exercise showed that annual cash interest savings would be less than 600 million dollars, "a fraction" of Ford's outflows in 2008 and its expected outflows this year.
"We expect continued heavy cash losses in Ford's automotive operations for at least the next year," said S&P's credit analyst Robert Schulz.
The outflows are being caused by weak auto sales in almost every market, but especially in the United States and Europe.
"We believe fundamental business risks will remain unchanged for at least the rest of 2009 and perhaps longer, most notably the company's exposure to weak vehicle demand globally, but also the substantial execution risk of the company's ongoing restructuring and repositioning," the agency said.
S&P said the Ford rating also reflected concerns that US rivals General Motors or Chrysler, could file for bankruptcy in the coming months, which "would be a negative development for Ford's liquidity, given the commonality of the auto sector supply base."
S&P said that Ford may have to "revisit" its informal request for nine billion dollars of loans from the US government, unless industry sales begin to recover later this year.
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 combined 17.4-billion-dollar government rescue.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
