Ford Reducing Debt by More Than $4 Billion
The only car maker of the Big Three that didn't need to be bailed out or didn't go into bankruptcy protection is to pay $3.8 billion in cash to the UAW Retiree Medical Benefits Trust. It will be making scheduled debt payments due on the Notes A and B held by the trust and paying the entire remaining balance of Note A ahead of schedule. It is also paying $255 million of previously deferred quarterly distributions on other securities.
This way, it's also gaining more flexibility over a three-year period to pre-pay all or a portion of the remaining $3.6 billion outstanding principal amount of Note B.
These actions, Ford says, combined with an April payment of $3 billion on its 2013 revolving credit facility, reduced Ford's debt by more than $7 billion during the second quarter. Ford had $34 billion in debt at the end of the first quarter. The 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.
It also didn't hurt that Citi upgraded Ford's shares to hold from sell after a recent pullback.