(Updates with analyst comment and background.)
By Jeff Bennett
DOW JONES NEWSWIRES
DETROIT (DOW JONES)--Ford Motor Co. (F) said a refinancing would
cut $9.9 billion from its debt in a move that stokes pressure on
rival General Motors Corp. (GM) to secure a deal with its
creditors.
The cash and equity offer launched by Ford last month received a
better-than-expected reception from its creditors, cutting an
annualized $500 million in interest expenses.
Ford and its rivals are still struggling under the weight of
falling global auto sales, and the move will help the company's
stated aim of avoiding any resort to U.S. government aid.
The company has managed to take advantage of efforts by GM and
Chrysler LLC (C.XX) to reach deals with their stakeholders to
secure further U.S. support.
Ford has already reached a deal with unions to restructure
commitments to a union-run health-care plan.
"Ford is upstaging GM with what its doing, said Pete Hastings,
senior analyst at Morgan Keegan. "It's handling things more
smoothly than GM and accomplishing what it needs to do without the
government getting involved.
"Ford has offered better terms than are currently being
discussed by GM and that would substantiate GM's bondholder claims
that they should be offered a better deal. It may cause the
government to re-evaluate its position and put more pressure on the
[United Auto Workers] union," he said.
GM bonds fell after the Ford announcement, with its 8.375% notes
due 2022 down 2.25 points at 11.5 cents on the dollar, according to
KDP Investment AdvisorsKDP.
Ford shares were recently up 15% at $3.74.
The company said its financing arm will use $2.4 billion in
cash, in combination with stock, to buy backthe debt once the offer
is closed on April 8. Ford had a debt of $25.8 billion at the end
of 2008, excluding payments due to the health-care plan.
GM and Chrysler are struggling to reach a deal with creditors
and unions to avoid any government-driven bankruptcy filings.
Ford said last month that it aimed to retire up to $10.4 billion
in debt through a combination of cash and stock largely financed by
Ford Motor Credit, its inhouse finance arm.
About $4.3 billion in Ford's 4.25% senior convertible notes due
in December 2036 were validly tendered under the deal, which will
result in the issue of 468 million shares.
Separately, under Ford Credit's tender offer, about $3.4 billion
of notes were tendered, at a total purchase price of $1.1
billion.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542;
jeff.bennett@dowjones.com
(Tess Stynes and Kate Haywood contributed to this report.)