Ford reduces its debt by $1.9bn with bond swap

FORD is cutting its debt by $1.9bn (£1.2bn) in a bid to strengthen its balance sheet and get itself rated investment grade again.

In Ford’s tender offer to reduce its automotive operations debt, holders of some $2.55bn of senior convertible notes due in 2016 and 2036 accepted cash and company stock for debt.

That reduces Ford’s annual interest payments by about $180m, the carmaker said yesterday.

Ford borrowed heavily in late 2006, allowing it to avoid the bankruptcies that felled rivals General Motors and Chrysler last year, but leaving it with a heavy debt load.

The carmaker expects a solid profit in 2010 and has cut its automotive operations debt by about $12.8bn this year, reducing annual interest expense by nearly $1bn.

Ford also expects to be net cash positive in its automotive operations – meaning it would have more cash than debt – by the end of 2010. It would be the first time that this would have happened since the second quarter of 2008.

Ford will pay $534m in cash premiums and on 30 November issue 274m shares of common stock to convert the notes.