Detroit – Ford Motor Co. said Wednesday it will raise its new borrowing capacity to as much as $23 billion, up from the $18 billion figure it announced last week.
Part of the increase, a $3.5 billion raise in a previously announced revolving-credit facility, was due to “overwhelming support” by lenders, Ford said in a filing with the Securities and Exchange Commission.
Ford also increased the amount of convertible notes it is offering to $4.5 billion, from $3 billion announced previously.
The No. 2 U.S. automaker said last week it planned to get the financing to help fund its restructuring and to cover anticipated losses in its automotive operations during the next two years.
Ford said it still plans to borrow $18 billion but wants the additional credit options for flexibility as it goes through the massive restructuring plan.
“Our target is still $18 billion, but these contingencies assure us that we have access to additional funding options,” Ford spokesman Oscar Suris said.
The company also told the SEC on Wednesday that it must pledge its investment in Mazda Motor Corp. as collateral for $2 billion of first-lien debt capacity that was available before the $18 billion in borrowing was announced. Ford owns about one- third of Mazda. The additional Mazda collateral is necessary because of the potential for increased borrowing, Suris said.
Shelly Lombard, senior credit analyst at the bond-research firm Gimme Credit, said the additional borrowing capacity isn’t necessarily a sign that Ford’s fortunes have worsened.
Rather it’s a sign that lenders now are willing to loan Ford money at good rates.
“They’ve decided, and I think it’s a very wise move, you borrow when it’s available,” Lombard said. “I think it’s one of those things that you get while the getting is good. Right now, the capital market is good.”
After the SEC filing, Fitch Ratings lowered Ford’s senior unsecured ratings to “B-” from “B” and its recovery rating to “RR5” from “RR4,” citing the additional financing.
Fitch’s recovery ratings are a relative indicator of creditor recovery on a given obligation in the event of a default. An “RR5” rating means Fitch believes there is an 11 percent to 30 percent chance of recovery.
Dearborn-based Ford said last week that the $18 billion in financing – secured by its domestic plants and other automotive assets – will help protect against a recession or other unanticipated events. Ford’s filing said it would raise a previously announced $7 billion to $8 billion revolving-credit facility to $10.5 billion to $11.5 billion.
