Ford Awarded Investment-Grade Yields on $1 Billion of Debt

[HSE2]

By Sapna Maheshwari

Jan. 31 (Bloomberg) -- The bond market is awarding investment-grade borrowing costs to Ford Motor Co.’s finance arm on $1 billion of debt today after the No. 2 U.S. automaker reiterated its goal of shedding its junk rankings.

Ford Motor Credit Co. plans to offer five-year senior notes that may yield 4.25 percent, said a person with knowledge of the offering, who declined to be identified because terms aren’t set. That compares with the average yield of 4.24 percent on BBB graded securities, according to Bank of America Merrill Lynch index data, and is lower than the coupon on investment-grade five-year notes issued by SLM Corp., Citigroup Inc. and Entergy Corp. earlier this month, Bloomberg data show.

Ford, based in Dearborn, Michigan, is ranked on the cusp of investment-grade, with a Ba1 rating and positive outlook at Moody’s, and a BB+ grade and stable outlook from Standard & Poor’s. The auto company had CCC grades as recently as 2009. Controller Bob Shanks reiterated on Jan. 27 in a conference call to discuss earnings that Ford has “a strategy to get back to an investment-grade balance sheet, which entails among other things an increase in our unsecured debt versus” asset-backed securities.

“Improved operating results and cash-flow generation along with continued debt reductions should lead to stronger credit ratios over the intermediate term,” Evan Mann, an analyst at New York-based credit research firm Gimme Credit LLC, said in a note on Jan. 27. “The company continues to reiterate its goal of restoring its investment grade rating.”

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[Falc'man]

It's satisfying to see. I still remember the days where they mortgaged everything, even the blue oval, and thought, wow, they're only hanging on by a thread, and to be honest, at the same time was also optimistic, especially after learning that he was the same guy to pull Boeing out of oblivion.