Ford to repurchase up to $5 billion in junk bonds as it restructures its balance sheet

The Ford firm symbol is exhibited on a indicator outside of the Chicago Assembly Plant on February 03, 2021 in Chicago, Illinois.

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DETROIT – Ford Motor designs to repurchase up to $5 billion of its higher-yield bonds as portion of a wider system to restructure its stability sheet that grew to become extra bloated with crisis borrowings when automakers experienced to shutter operations last calendar year.

Ford is acquiring again a great deal of the $8 billion in bonds the business issued at the start off the coronavirus pandemic at lofty yields of between 8.5% and 9.625%, in accordance to Ford Treasurer Dave Webb. It really is also repurchasing some more mature bonds at likewise high yields in hopes of upgrading its credit score ranking, which dropped its financial commitment-grade position in March 2020.

Ford expects to fund the buyback with cash on hand, which totaled about $31 billion to conclusion the 3rd quarter. Webb mentioned a $1 billion or much more “environmentally friendly” bond could adhere to as component of a wider effort to “aggressively restructure” its balance sheet underneath its Ford+ turnaround plan. He said the corporation is searching to concern 10-calendar year bonds that spend between 3.5% and 4.5%.

“We think it really is the time to aggressively restructure the balance sheet, lower our curiosity prices, and seriously clear the decks for 2022 and over and above. That is seriously what we are wanting to carry out in this article,” Webb instructed reporters for the duration of a contact.

The repurchase was introduced as aspect of Ford’s new “sustainable funding framework,” which the automaker is calling a 1st of its variety for the North American automotive industry. It will focus on motor vehicle electrification and other environmental and social parts these types of as thoroughly clean production and neighborhood revitalization.

It truly is a change for Ford, which includes its Ford Credit score financial subsidiary, as environmental, social and governance, or ESG, investing turns into more popular and a thing to consider of buyers.

The bond repurchase and new framework are aimed at encouraging to finance the Ford+ program, which include investing tens of billions of dollars into electrical and autonomous auto systems.

Webb declined to speculate on when the automaker expects to return to investment decision quality. He claimed the firm is “intense on acquiring there as quickly as we maybe can.”

“The steps that we’re taking below on the balance sheet more assistance that effort and hard work and intent. We believe they, undoubtedly, should be considered as a credit history beneficial,” Webb reported.