Ford Motor plans to repurchase up to $5bn of its high-yield (HY) bonds and issue $1bn green bonds to tap the booming market for ESG bonds to help them finance new electric vehicles and expand credit to customers with lower scores. This is on the back of the Ford+ turnaround plan to restructure its balance sheet. The automaker ultimately aims to regain an investment grade (IG) rating for itself and Ford Credit, its financial services arm, which in turn would help to reduce future borrowing costs. Ford became a fallen angel in March 2020 with the onset of the pandemic – its rating was cut by S&P to BB+ from BBB- and later by Fitch in May 2020 to BB+ from BBB-, thereby moving from IG to HY territory.

The automaker expects to fund the tender for HY bonds carrying coupons between 8% to 9.5% with cash on hand, which totaled $31bn in 3Q2021. Ford’s Treasurer Dave Webb said that the automaker is offering a $1bn green bond that pays between 3.5-4% to replace some of the HY bonds and to supplement the zero-interest convertible debt it issued earlier this year. Part of the proceeds will help fund Ford’s ambitious plan to shift a significant portion of its global production from fossil fuel powered vehicles to battery-powered vehicles. Ford also announced a “sustainable financing framework” to provide access to new sources of capital, including investors supporting its ESG initiatives. Webb added that “the actions that we’re taking here… should be viewed as a credit positive”.

Ford’s 9% 2025s were up 2.43 points to 122.719 yielding 2%.

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