NEW YORK: Ford Motor Co has obtained commitments from sufficient relationship banks to extend the maturity of no less than 90% of US$5.35bn of revolving loans for one year, a source shut to the financing said.
The second-largest US automaker was in discussions with its financial institution lenders since early July a couple of one-year extension of its $3.35 bn three-year most important company revolving credit score facility and its $2 bn three-year supplemental revolving credit score facility.
JP Morgan leads the deal, in accordance to thee sources shut to the transaction.
The Ba2/BB+/BB+ automaker is in search of to deal with mortgage maturities for the primary time since downgrades in March eliminated its last funding grade rating. The transfer is expected to take a look at banks’ willingness to lend to a US family identify in an trade that has been hit onerous by the coronavirus pandemic.
More lenders might agree to extend earlier than the transaction closes on July 27. The company is wanting to full the extension forward of its earnings name on July 30, a second source said.
“They want to be prepared so they can say something good,” the second source said. “That they were able to extend the liquidity by another year.”
To incentivize banks to agree to the extension, Ford supplied to repay the US$3.35bn three-year most important company revolver it borrowed in March as half of a bigger US$15.4bn drawdown under its credit score facility, the 2 sources said.
The company is expected to use money on its steadiness sheet to repay the US$3.35bn three-year mortgage on July 27 after the modification and extension closes, two sources acquainted with the transaction said.
As of April 9, Ford had money of US$34.6bn, together with the revolving credit score drawdowns, and US$8bn in bond issuances, in accordance to US Securities and Exchange Commission (SEC) filings.
“We typically don’t comment on rumor or speculation,” said a Ford spokesperson. A JP Morgan spokesperson declined to remark.
Both the US$3.35bn three-year most important company revolving credit score facility and the US$2bn three-year supplemental revolving credit score facility come due on April 30, 2022, in accordance to SEC filings. The loans shall be prolonged to 2023, two sources shut to the transaction said.
The company is providing an all-in sp of 225bp over Libor, cut up between a drawn sp of 175bp and an undrawn charge of 50bp for the primary company and supplemental revolving credit score services which can be prolonged, two sources said.
All lenders who agree to the extension will obtain a 40bp charge on the quantity prolonged.
Lenders who select not to extend will stay within the present loans at a present all-in sp of 175bp over Libor, cut up between a drawn sp of 147.5bp and an undrawn charge of 27.5bp for the primary company and supplemental revolving credit score services.
The company is leaving unchanged its absolutely funded US$1.5bn supplemental time period mortgage that matures on December 31, 2022 and the US$10.05bn five-year company revolving credit score facility tranche due April 30, 2024.
“It’s good. Given that they are not in an easy sector,” the primary source shut to the transaction said. “It’s a good outcome.”
The charges Ford’s lenders obtained for its US$8bn in bond issuances in April might have helped them get extra snug with the extension. The notion the US authorities supported the automaker by way of the Federal Reserve’s company bond buying program might have been one other constructive, the source said.
The company first reached out to its JP Morgan-led financial institution group in February to refinance US$15.4bn in revolving credit however in March determined to draw down on the services and postponed its refinancing plans as market situations deteriorated, two banking sources said on the time.
In March, Ford drew US$13.4bn under its company credit score facility – together with the three-year company revolver it’s in search of to extend – in addition to US$2bn under its three-year supplemental credit score facility, for a complete of US$15.4bn.
The company said borrowings could be used to “offset the temporary working capital impacts of the coronavirus-related production shutdowns and to preserve Ford’s financial flexibility,” in accordance to a March 19 press launch.
Ford reported a 33.3% drop in US gross sales within the second quarter tied to shutdowns and shelter-in-place orders due to the coronavirus, the company said in a July 2 press launch.
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