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Financially-hit, Ford goes for $18 billion debt
Crisis-hit Ford plans to pledge assets as collateral.
BY A CORRESPONDENT
November 28, 2006
Heightened problems in the financial department has led to the United States No.2 carmaker Ford Motor to go for a $18 billion loan. The company plans to borrow by pledging assets as collateral for loans. This is the first time Ford has used collateral for loans.
The unprecedented plan might help Ford finance efforts to rescue a North American operation that has lost $12.39 billion before taxes and including special items since January 2005.
According to reports, Ford motor’s new debt includes about $8 billion in secured revolving credit that replaces an existing unsecured credit line of $6.3 billion, and a secured loan of about $7 billion.
The move has led analysts to say that Ford Motor sees nothing but trouble ahead. Ford will also borrow $3 billion in unsecured notes that can be converted into Ford common stock, will be backed by assets including its plants in the US, stock of subsidiaries including Ford Motor Credit Co. and Volvo, and up to $4 billion of domestic cash, added reports. The funding is expected to help Ford with the cash requirements of its overhaul.
According to reports quoting industry sources, the Citigroup Inc., Goldman Sachs and J P Morgan Securities Inc are the companies arranging the financing.
Statistics say that Ford has lost about $7 billion in the first nine months of 2006. The company had in October said that it may go for fresh funding secured by its automotive assets to protect its cash position as it pays the bill to close 16 plants and cut up to 45,000 jobs. The company is also offering buyouts to its 75,000 unionized workers in the US to reduce its factory staff by nearly half.
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