Summary
Ford Motor Company (F) filed an 8-K on November 24, 2009, detailing a significant amendment to its credit agreement. This amendment effectively restructures a substantial portion of its revolving credit facilities and introduces a new term loan. The primary goal appears to be extending debt maturities and providing more financial flexibility. The company is also modifying covenants related to debt repayment, refinancing, and restricted payments, aiming to enhance its ability to manage its capital structure during a challenging economic period.
Key Highlights
- 1Ford entered into the Fourth Amendment to its Credit Agreement, which has been amended and restated (ARCA) effective November 24, 2009.
- 2Total revolving credit commitments have been reduced from $10.7 billion to $7.2 billion.
- 3A new revolving facility with a total commitment of $7.2 billion has been established, maturing on November 30, 2013.
- 4A new term loan of $724 million has been created, maturing on December 15, 2013, with similar terms to the existing term loan but without Mandatory Prepayments.
- 5Lenders extending their revolving commitments received a 1 percentage point increase in interest rate margins, increased quarterly fees, and an upfront fee payment. Ford will repay $1.9 billion of existing revolving loans on December 3, 2009, due to commitment reductions.
- 6Key covenant amendments allow Ford more flexibility in redeeming or prepaying certain unsecured and second lien debt with equity, refinancing debt and preferred stock, and making restricted payments up to $500 million annually/$1 billion in aggregate.
- 7New restrictions include the termination of unused revolving commitments from Defaulting Lenders and limitations on stock repurchases or dividends if revolving facilities are more than 50% drawn.