Ford reducing its debt by $4 billion

(June 30, 2010) DEARBORN, Mich. — Ford today is reducing its debt by more than $4 billion — primarily by retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule.

The company said it is taking the action to further strengthen its balance sheet as it gains momentum on its One Ford plan and remains on track to deliver solid profits and positive automotive operating-related cash flow this year.
Ford is making scheduled payments in cash totaling about $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust — including about $250 million due under Note A, and $610 million due under Note B. Ford had the option to pay Note B with cash or Ford stock but agreed to pay with cash. In addition, Ford and its subsidiary, Ford Motor Credit Company, are paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2 percent.
Separately, Ford is making a $255 million cash payment to bring current previously deferred quarterly distributions on the 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.
With today’s actions and an April payment of $3 billion on its 2013 revolving credit facility, Ford will have reduced its debt by more than $7 billion in the second quarter.  The second quarter debt reduction will save Ford more than $470 million in annual interest expense.
“Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future,” said Ford President and CEO Alan Mulally. “We expect to continue to improve our balance sheet as we deliver on our plan. Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks.
“We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the Trust for their health care benefits,” Mulally said.
The second quarter debt reductions are in addition to a series of actions Ford has taken since early 2009 to improve its balance sheet. These include completing transactions in spring 2009 that reduced Ford’s Automotive debt obligations by $10.1 billion, and raising more than $5.7 billion since the second quarter of 2009 through several equity and equity-linked offerings.