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Ford's impeccable timing Print E-mail
Wednesday, 04 November 2009

By Matthew Quinn

Once a plodding, money-losing auto industry dinosaur, Ford Motor is reinventing itself as a profitable, finance-savvy enterprise.

Fresh off reporting a third quarter profit of $1 billion on Monday, Ford tapped the convertible bond market on Tuesday, pricing $2.5 billion in notes. That's $500 million more than it had originally planned. The company benefited from one-notch credit rating upgrades from Moody's Investors Service and Standard & Poor's on Tuesday.

The move was just one of several announced on Monday by Ford to bolster its liquidity and strengthen its balance sheet. The automaker is also seeking to extend the maturity of its revolving credit facility from 2011 to 2013 in exchange for lower credit commitments and higher interest rates and fees. Additionally, Ford is looking to raise $1 billion through the sale of common stock.

"We expect the moves will enhance Ford's automotive liquidity and over time reduce the company's debt burden, providing an additional cushion given the still uncertain state of the economy," said Alan Mulally, Ford's president and CEO, in a press release Monday.

The day after announcing its liquidity-improvement plans, Ford reported that its October auto sales were up 2.6 percent.

"Ford has developed a knack for approaching the capital markets at exactly the right time with the right deal," Gimme Credit analyst Shelly Lombard wrote in a note to investors on Tuesday.

The mix of deals, in particular, impressed some observers.

"The trade-off of revolver extension for reduced commitments makes good sense for Ford and will be an inherent positive to the liquidity and refinancing risk profile of the company when taken in conjunction with the other actions proposed," CreditSights analysts wrote in a research note Tuesday.

But timing, again, is everything.

"Tapping into that bullish sentiment for purposes of bolstering liquidity levels and improving the balance sheet while extending liabilities all adds to the sense of relief that has been pervasive in the post-government rescue period," the analysts continued.

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