DBRS Comments on Ford’s Common Shares Offering

DBRS notes that Ford Motor Company (Ford or the Company) today announced a registered public offering (the Offering) of 300 million shares of its common stock at par value of $0.01 per share. It is estimated that Ford could raise about $1.8 billion from the equity issue at today’s closing prices (Ford has also granted the underwriters a 30-day option to purchase up to 45 million shares). DBRS considers the equity issue to be modestly positive as it further strengthens the Company’s liquidity position while also granting Ford additional flexibilty with respect to the funding of its Voluntary Employee Beneficiary Association (VEBA) obligations. However, this transaction is not significant enough at this time to warrant any ratings action.

Ford further indicated that the net proceeds from the Offering are expected to be used for general corporate purposes, including to fund with cash, instead of stock, a portion of the payments the Company is required to make to the VEBA.

The Company has been making progress in improving its financial position, notably the recently completed debt restructuring initiatives. However, DBRS notes that Ford must also demonstrate continued progress with respect to other aspects (i.e., operations, cost and capacity reductions, product portfolio, etc.) of its attempted transformation. This progress is all the more challenging in the face of current global automotive industry conditions that appear to be deteriorating even relative to last year’s severe downturn.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Automotive, which can be found on our web site under Methodologies.

This is a Corporate (Autos & Auto Parts) rating.