Ford's Treasurer Comments on Debt Payments (F)

Ford Motor Co. (NYSE: F), America’s only major automaker not in debt to taxpayers, is seeing its shares gain this morning after it paid off more than $4 billion in debt.  Citigroup also has chimed in with an analyst upgrade to Hold from Sell based on the recent share price pullback.  24/7 Wall Street got a few minutes on the phone this morning in a short exclusive interview with Neil Schloss, Treasurer and Vice President of Ford, to ask a few questions for what lies ahead.

With the recent weakness as shares fell from over $14.00 in April to under $10.00 as recently as yesterday’s $9.88 close, we wanted Ford to address some of the concerns that have been in the market about Ford’s high debt load.  For starters, this morning’s news was that Ford was paying some $3.8 billion in cash to the UAW Retiree Medical Benefits Trust ahead of schedule; and it added in another $255 million n payments for a total of just over $4 billion paid down.

I asked Neil Schloss about the company’s debt payments, debt loads, and financial outlook.  For starters, Ford’s internal outlook has not changed and the company is not focused on a double-dip recession.  Ford is focused on debt repayment and paying down that debt with its positive cash flow.

My first question boiled down to this, “With GM coming to market in an IPO, would Ford consider selling additional equity to raise cash to pay off more of its debt?”  While not an absolute NO answer, Schloss indicated that Ford has already sold equity over the last year and a half.  He also noted that the company could have used $610 million of this morning’s total $4 billion paid in stock.  The company paid that part in cash rather than stock.  Again, Ford is paying off the debt with its free cash flow.

Schloss also commented that the company will continue to pay down its high debt.  He noted, “The company has too much debt.”  Ford wants to get that down considerably and ultimately wants to get its investment grade rating back.

Along with this morning’s news, Ford also paid $255 million of previously deferred quarterly distributions on its 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II, and it said that quarterly payments will resume starting with the payment due on July 15, 2010.  The company noted that it has more flexibility over a three-year period to pre-pay all or a portion of the remaining $3.6 billion outstanding principal amount of Note B, and with its payments in April it has now shaved off some $7 billion in debt in the second quarter alone.  This debt reduction will, according to the company, save Ford more than $470 million in annual interest expenses.

The market is taking Ford’s debt payments as news that more debt pay downs are coming.  Otherwise, shares would not be up 5.2% at $10.40 on more than 50 million shares in less than the first hour of trading.

JON C. OGG