Ford Equitizing $10.4 Billion In Debt

The only US automotive company not to be on the taxpayer's payroll, Ford, earlier announced it would pursue a proactive debt for equity and cash exchange in which it would convert up to $10.5 billion of its $25.4 billion in debt at year end. The exchange is in fact a combination of three separate transactions:

• $4.88 billion of 4.25% Convertible notes due 2036 which would receive Ford common stock at a premium, or specifically 108.6957 shares per $1,000 in converts. The result would be incremental dilution of approximately 530.4 million new shares, or roughly 22% of the 2.3 billion shares outstanding.
  
  
• $1.3 billion cash tender offer for unsecured, non-convertible debt of which $8.9 billion is outstanding and which will be bought back at 30 cents on the dollar (including a 3 cent early tender premium) (assuming a 30 cent final conversion price this implies $4.3 billion in face notional will be retired).
  
  
• $500 million cash tender offer for Ford's $6.9 billion senior secured term loan, launched by Ford Credit. The term loan will be purchased via a Dutch auction with bids ranging from 38 to 47 cents (assuming the low bid of 38 is the final one, implies $1.3 billion of the term loan will be retired).

The full table of non-convertible securities which are eligible for the conversion is presented below. The conversion is a good start on the way to viability however the next and more crucial step is to have people actually purchase cars. And this is where Ford is in a lot of trouble, seeing how even BMW barely managed to sell a whopping 10 of its 7 series sedans in all of February.

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