Ford's Preferred Redemption Trims Out Another $3 Billion in Debt (F)

Ford Motor Company (NYSE: F) is continuing to make good on its promise to cut debt and get its finances in better order.  Despite having the best balance sheet by far of the Big Three (or it is the Big Two?), For is cutting its debt levels and is getting rid of some preferred shares.

Ford Motor Company Capital Trust II will redeem its outstanding 6.50% Cumulative Convertible Trust Preferred Securities (NYSE: F PR S) on March 15, 2011 in cash.  Holders may convert their trust preferred securities into 2.8769 shares of Ford common stock for each trust preferred security converted.  The redemption or conversion of the preferred shares will cut Ford’s debt by about $3 billion ($2.98 billion).  The company has already trimmed down about $14.5 billion in net auto debt in 2010.

On March 15, 2011, all of the outstanding 6.50% Cumulative Convertible Trust Preferred Securities will be redeemed for cash at $50.33 per trust preferred security, plus accrued and unpaid distributions of $0.5416667 per trust preferred security.

This is the equivalent to a conversion price of $17.38 per share of Ford common stock, which compares to a common share closing price of $15.95 today.  The move is expected to trim Ford’s interest costs by about $190 million per year.

Ford common stock did close down 0.8% at $15.95 today but shares are up about 1.5% at $16.20 in the after-hours trading.

JON C. OGG