Ford reveals its strategy to rewin investment-grade credit rating

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Nov 4, 2021
  • Ford says it will repurchase up to $5.0 billion worth of its high-interest bonds.
  • It will also tap into “green” bonds to fund the Ford + turnaround plan.
  • The Detroit automaker blew past Wall Street estimates in its fiscal third quarter.

Ford Motor Company (NYSE: F) said on Thursday it will repurchase up to $5.0 billion worth of its high-interest bonds to upgrade its credit rating.

Ford will use its cash stature to fund the repurchase

Ford issued $8.0 billion in bonds at a high yield of 8.5% to 9.625% at the start of the pandemic that made it surrender its investment-grade rating in March 2020.

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The automaker now intends to use its cash stature that stood at roughly $31 billion at the end of Q3 to buy back most of these bonds as part of its new “sustainable financing framework”. Ford, however, refrained from predicting how long it could take for it to return to the investment-grade rating.

The news comes a week after Ford reported its financial results for Q3 that blew past Wall Street estimates.

Ford to also tap into the ‘green’ bonds

According to Ford Treasurer Dave Webb, the automaker also plans on tapping into the “green” bonds to fund the Ford + turnaround plan that’ll see the car manufacturer invest billions of dollars into electric and autonomous vehicle technologies.

We think it’s time to aggressively restructure the balance sheet, lower our interest costs, and really clear the decks for 2022 and beyond. That’s what we’re looking to accomplish here.

Ford is expected to issue 10-year bonds at a yield of 3.5% to 4.5%. The automaker wants electric vehicles to account for about 50% of its global sales by 2030 – in pursuit of which, it said it’ll invest over $30 billion in EVs through 2025.

Shares of the American multinational have more than doubled this year, adding billions to its market cap that now stands at $75 billion.  

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