8-KMaterial AgreementsFinancial EventsExhibits & Filings

FORD MOTOR CO 8-K Report, Material Agreement (Dec 16, 2024)

Filed December 16, 2024For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company has announced a significant financial development through its joint venture, BlueOval SK, LLC (BOSK). On December 13, 2024, BOSK secured a substantial loan arrangement with the Department of Energy (DOE) for up to $9.63 billion. This funding is earmarked for the construction of battery manufacturing plants in Tennessee and Kentucky, crucial for Ford's electrification strategy. As a 50% owner of BOSK, Ford has entered into a Sponsor Support, Share Retention and Subordination Agreement (SSA) with the DOE, which includes a guarantee of 50% of BOSK's payment obligations under the loan. The SSA imposes covenants on Ford that are largely consistent with its existing credit agreements, focusing on financial reporting, business maintenance, and limitations on mergers, liens, and sale-leaseback transactions. Notably, Ford must maintain available liquidity of at least $4 billion. The agreement also outlines specific events of default related to Ford's financial health and corporate actions, which, if triggered, could also constitute defaults under the primary loan agreement.

Key Highlights

  • 1BlueOval SK (BOSK), a Ford 50% joint venture, secured up to $9.63 billion in financing from the Department of Energy (DOE) for battery plant construction.
  • 2The DOE loan is intended to fund manufacturing facilities in Tennessee and Kentucky.
  • 3Ford has guaranteed 50% of BOSK's payment obligations under the DOE loan through a Sponsor Support Agreement (SSA).
  • 4The SSA includes covenants for Ford similar to its existing credit agreements, covering financial reporting, business continuity, and restrictions on certain corporate actions.
  • 5Ford is required to maintain a minimum of $4 billion in available liquidity under the SSA.
  • 6The SSA specifies events of default tied to Ford's financial condition and operational status, which can trigger defaults under the DOE loan.
  • 7The BOSK DOE Loan has a final maturity date expected in July 2040.

Frequently Asked Questions

The loan is specifically for financing the construction of battery manufacturing plants in Tennessee and Kentucky by BlueOval SK, LLC (BOSK), Ford's 50% joint venture with SK On. This is a key part of Ford's strategy to ramp up its electric vehicle (EV) production capabilities.

Ford's direct financial exposure is through its 50% ownership of BOSK. More significantly, Ford has agreed to guarantee 50% of BOSK's payment obligations under the DOE loan. This means Ford could be liable for up to approximately $4.815 billion if BOSK defaults on its payments.

The SSA imposes covenants on Ford that are largely similar to its existing credit agreements. These include requirements for financial reporting, maintaining its automotive business and corporate existence, and limitations on actions such as mergers, incurring new liens, and engaging in sale-leaseback transactions. Ford must also maintain a minimum of $4 billion in available liquidity.

The SSA outlines 'Ford Sponsor Entity Defaults' which, if triggered, would also constitute an event of default under the DOE loan agreement. These defaults are related to inaccuracies in representations, breaches of covenants, cross-defaults or cross-accelerations on other significant debt, bankruptcy events, certain ERISA events, and large unsatisfied judgments against Ford or its significant guarantors.