Ford to cut $10 bln in debt with cash, equity offer

The automaker and its financial arm are putting up $2.2 billion in cash and about 500 million shares of stock to entice holders of bonds and secured-term debt.

 

The company said Wednesday it is restructuring the debt to reduce its costs and remain competitive, and it still does not intend to seek government loans.

 

The automaker had $25.8 billion of automotive debt as of the end of 2008.

 

The automaker's announcement is the latest step Ford has taken to bolster its finances in the face of the global economic downturn and to maintain funding to complete a turnaround plan without seeking emergency U.S. government loans.

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Ford, the only U.S. automaker to not seek government aid, had earlier reached an agreement with the United Auto Workers (UAW) union on contract changes to reduce its labor costs.

 

The UAW had also agreed to accept up to half of required payments to a union retiree healthcare trust in stock, providing Ford with additional liquidity.

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The UAW agreement is contingent on Ford pursuing restructuring action with other stakeholders, including debt reduction.

 

Ford said it will pay a premium in cash to persuade holders of its 4.25 percent senior convertible notes due Dec. 15, 2036, to convert to Ford's common stock.

 

General Motors and Chrysler also are trying to swap debt for equity as a requirement of the $17.4 billion in government loans they have received.