DEARBORN, Mich. — Ford Motor Co. said Wednesday it will try to eliminate up to $10.4 billion of its debt by offering debtholders cash and stock as the troubled automaker continues to restructure amid a severe automotive- sales downturn.
The Dearborn-based company 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 into the swap.
The company said reducing the debt will cut the amount it pays in interest and put it in better position to compete with General Motors Corp. and Chrysler LLC.
“This is all part of a restructuring plan to make the company healthier in the end,” said Ford spokesman Mark Truby.
GM and Chrysler also are trying to swap debt for equity as a requirement of the $17.4 billion in government loans they have received.
Ford said Wednesday it still does not intend to seek government loans.
The company said in a news release it will offer to convert up to $4.2 billion in bonds issued in 2006.
For each $1,000 bond, the company will offer 108.7 shares of stock that had been set aside when the bonds were issued, plus $80 in cash.
In addition, the company will offer to pay up to $1.3 billion in cash from Ford Motor Credit Co. for up to another $4.9 billion in bonds.
Those bonds would be purchased for 30 cents on the dollar; they are now trading at around 20 cents, the company said.
The unsecured-debt-swap offers expire at 9 a.m. April 3.
However, the offer of 30 cents on the dollar will drop to 27 cents after March 19, the company said.
Other components of the offer include trading $500 million in cash for up to $1.3 billion in term loans through an auction process, the company said.
Ford said it is trying to match the debt-restructuring requirements imposed on Chrys ler and GM under the terms of their government loans.
GM’s terms, for instance, set a target for the company to swap two-thirds of its unsecured debt for equity.
