Some details on the $18 Billion loan for you, Furthur...
Ford Motor Co. (F) on Nov. 27 said it's getting around $18 billion of financing -- but the Dearborn, Mich.-based automaker put up collateral to get the money.
It's the latest attempt in Ford's struggle to revive its money-losing business. The company, which employs 300,000 people and makes brands ranging from the Volvo to the Jaguar, has been buckling under a slough of travails such as tough competition, excess capacity, and suffocating costs.
Now Citigroup Corporate and Investment Banking, Goldman Sachs Credit Partners, and J.P. Morgan Securities are loaning billions to Ford in a deal expected to close before Dec. 31, according to a press release.
The deal includes an $8 billion senior secured revolving credit facility that comes due in five years -- but Ford had to back its promise to repay that debt with collateral such as its property, U.S. automotive assets, Ford Motor Credit Co. and Volvo stock, and up to $4 billion of cash. The new debt is meant to replace a $6.3 billion unsecured credit facility that Ford had obtained without collateral.
Besides the $8 billion of debt, Ford is getting another $7 billion or so from a senior secured term bank loan and tapping the market for about $3 billion of debt or convertible notes.
Now Ford expects to have liquidity (including cash and available debt funding) of about $38 billion at year end. The company lost 14 cents per share during the second quarter of this year, compared to 47 cents per share of earnings during the same quarter of 2005. Standard & Poor's Corp. said Nov. 25 that it expects Ford to lose another 46 cents per share during the third quarter.
In a Nov. 27 research note, Standard & Poor's equity analyst Efraim Levy said the plan "suggests to us an admission that the multi-billion dollar negative free cash flow we project for the current year and for 2007 will persist beyond that" as Ford finances restructuring and turnaround efforts.
Levy expects borrowing costs to increase and to be modestly dilutive to EPS in 2007. But S&P is "encouraged that Ford is being proactive in enhancing its liquidity at potentially lower costs than if it had waited for greater duress."
The analyst kept his hold rating on the shares.
