Ford Motor Co. said Friday it is selling 500 million dollars in stock to retire short-term debt owed by Ford Motor Credit.
“It's a debt for equity swap,” Ford spokesman Bill Collins told AFP.
“We're issuing new shares. We're going to take the proceeds and use them to retire some short-term debt for Ford Motor Credit.”
The transaction will reduce the company's outstanding debt which “strengthens our consolidated balance sheet.”
“We also did this back in August when Goldman Sachs sold 500 million dollars in equity that was used to retire short term debt.”
Ford Motor Credit Company LLC, which offers loans to consumers and dealers, is a wholly-owned subsidiary of the Ford Motor Co.
Ford Credit lost 1.43 billion dollars in the second quarter, mostly because of writedowns of unprofitable truck leases. Ford Motor had a record 8.7 billion dollar second-quarter loss after balance sheet adjustments that included asset writedowns.
Both Ford Motor Co. and Ford Credit have had their credit rating reduced twice in recent months as car sales have plummeted.
The downgrades have driven up Ford's cost of borrowing, which has also been made more difficult by the credit squeeze unfolding in the United States.
Ford's September sales fell 34 percent to 116,734 vehicles while year-to-date sales are down 17.3 percent at 1.5 million vehicles. Its market share fell to 12.1 percent from 13.3 percent in September 2007.
