DETROIT (Bloomberg) -- Ford Motor Co., seeking to regain an investment-grade credit rating, reduced its debt by more than $1.9 billion by paying investors in its convertible debt to exchange their notes for shares.
Investors converted $554 million of 4.25 percent senior convertible notes due Dec. 15, 2036, and $1.99 billion of 4.25 percent senior convertible notes due Nov. 15, 2016, the company said late Wednesday in a statement. The conversions lowered the debt in Ford's automotive operations to $20.9 billion on a pro-forma basis, compared with about $19.8 billion in gross cash.
“These successful conversion offers represent another significant step toward our goal of reducing our automotive debt and improving our balance sheet,” Chief Financial Officer Lewis Booth said in the statement.
Ford has reduced its automotive operations' debt by $12.8 billion this year, lowering annual interest costs by almost $1 billion. The company said Wednesday it will have more cash than debt by the end of the year. Moody's Investors Service rates Ford Ba2, the second level below investment grade, and Standard & Poor's rates it B+, two steps lower.
Ford lost its investment-grade ratings in 2005 as rising gasoline prices and falling truck sales led to $30 billion in losses from 2006 through 2008.
The company said it would take a charge of about $960 million in the fourth quarter to account for the conversion offers.
$180 million in savings
Ford gave holders of the 2036 notes 108.6957 shares of common stock and a cash payment equal to $190 for every $1,000 in principal amount, along with accrued and unpaid interest. Ford gave holders of the 2016 notes 107.5269 shares and a cash payment equal to $215 for every $1,000 in principal amount, along with accrued and unpaid interest.
The conversions will save $180 million in annual interest expenses, Ford said. The shares issued in the offer had already been included in the automaker's calculations of earnings per share since the beginning of 2010.
Ford, the only major U.S. automaker to avoid bankruptcy last year, earned $6.37 billion in the first nine months of the year, the most since 1998. New models such as the Fiesta subcompact and redesigned Taurus sedan have helped Ford's U.S. sales rise 21 percent this year, almost twice the market's gain of 11 percent.