Ford Motor (NYSE:F) plans to repurchase up to $5 billion of its high-yield bonds as part of a wider plan to restructure its balance sheet that became more bloated with emergency borrowings when automakers had to shutter operations last year.
Ford is buying back much of the $8 billion in bonds the company issued at the start the coronavirus pandemic at lofty yields of between 8.5% and 9.625%, according to Ford Treasurer Dave Webb. It’s also repurchasing some older bonds at similarly high yields in hopes of upgrading its credit rating, which lost its investment-grade status in March 2020.
Ford expects to fund the buyback with cash on hand, which totaled about $31 billion to end the third quarter. Webb said a $1-billion or more "green" bond could follow as part of a wider effort to "aggressively restructure" its balance sheet under its Ford+ turnaround plan. He said the company is looking to issue 10-year bonds that pay between 3.5% and 4.5%.
The repurchase was announced as part of Ford’s new "sustainable financing framework," which the automaker is calling a first of its kind for the North American automotive industry. It will focus on vehicle electrification and other environmental and social areas such as clean manufacturing and community revitalization.
It’s a shift for Ford, including its Ford Credit financial subsidiary, as environmental, social and governance, or ESG, investing becomes more popular and a consideration of investors.
F shares gained 62 cents, or 3.3%, to $19.25.
Related Stories
