Time is GMT + 8 hours Posted: 4-Oct-2008 04:10 hrs
The Ford Motor Company logo is seen at a dealership in Hudson, Wisconsin. Ford Motor Co. said Friday it is selling 500 million dollars in stock to retire short-term debt owed by Ford Motor Credit.
Ford Motor Co. said Friday it is selling 500 million dollars in stock to retire short-term debt owed by Ford Motor Credit.
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"It's a debt for equity swap," Ford spokesman Bill Collins told AFP.
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"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."
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The transaction will reduce the company's outstanding debt which "strengthens our consolidated balance sheet."
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"We also did this back in August when Goldman Sachs sold 500 million dollars in equity that was used to retire short term debt."
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Ford Motor Credit Company LLC, which offers loans to consumers and dealers, is a wholly-owned subsidiary of the Ford Motor Co.
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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.
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Both Ford Motor Co. and Ford Credit have had their credit rating reduced twice in recent months as car sales have plummeted.
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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.
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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. — AFP
