What is the main purpose of this Credit Agreement for Ford?

The Credit Agreement provides Ford with substantial new sources of liquidity, including a significant term loan and a large revolving credit facility. This is essential for managing its ongoing operations, financing capital expenditures, and maintaining financial flexibility during a critical period for the company.

What assets are being used as collateral for this new debt?

The borrowings are secured by a broad range of Ford's domestic automotive assets. This includes manufacturing plants (excluding those slated for closure), accounts receivable, inventory, marketable securities, 100% of the stock of principal domestic subsidiaries (like Ford Motor Credit Company), a substantial portion of stock in major foreign subsidiaries (like Volvo), and certain intellectual property. Cash is specifically excluded from the collateral.

Does this agreement allow Ford to raise additional debt in the future?

Yes, the Credit Agreement includes provisions allowing Ford to add incremental secured debt. It can issue up to an additional $2 billion in first lien pari passu debt under certain conditions, such as pledging its ownership interest in Mazda Motor Corporation. Additionally, it has the capacity to issue up to $4 billion in second lien debt, indicating flexibility to raise further capital if market conditions and company strategy permit.

How does this Credit Agreement impact Ford Motor Credit Company (FMCC)?

Ford Motor Credit Company is designated as a potential borrower under the revolving facility, and 100% of its stock is pledged as collateral for the borrowings. This integration highlights the importance of FMCC to Ford's overall financial structure and its role in securing the company's financing.

FORD MOTOR CO 8-K: Material Agreements

Summary

Ford Motor Company (F) filed an 8-K on December 15, 2006, disclosing the entry into a significant Credit Agreement. This agreement establishes a new seven-year, $7 billion term loan facility and an $11.485 billion five-year revolving credit facility. The new facilities are crucial for the company's financial flexibility and operational support. Notably, these borrowings are secured by a substantial portion of Ford's domestic automotive assets, including manufacturing facilities, accounts receivable, inventory, and significant equity stakes in its domestic subsidiaries (including Ford Motor Credit Company) and certain foreign subsidiaries like Volvo. The agreement also outlines provisions for adding incremental secured debt, indicating a strategic approach to managing its capital structure and accessing further financing if needed.

Key Highlights

1Ford entered into a new Credit Agreement on December 15, 2006.
2The agreement includes a $7 billion seven-year term loan facility and an $11.485 billion five-year revolving credit facility.
3Borrowings under the agreement are secured by a significant portion of Ford's domestic automotive assets, excluding cash.
4Collateral includes manufacturing facilities, accounts receivable, inventory, and equity in key domestic and foreign subsidiaries (e.g., Ford Motor Credit Company, Volvo).
5The company has the flexibility to add up to $2 billion in incremental first lien pari passu secured debt by pledging Mazda Motor Corporation shares or reducing revolving commitments/term loan principal.
6Ford can also issue up to $4 billion in second lien debt under specified conditions.

FORD MOTOR CO 8-K Report, Material Agreement (Dec 15, 2006)

Summary

Key Highlights

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