Fitch Affirms Ford and Ford Credit's Debt Ratings
14 September 2000
Fitch Affirms Ford and Ford Credit's Debt Ratings
CHICAGO--Sept. 14, 2000--Fitch has affirmed the debt ratings of Ford Motor Company (Ford) and its automotive financing subsidiary, Ford Motor Credit Company (Ford Credit), in light of Ford's announcement today of implementation of a $5 billion share repurchase program. The senior debt ratings for Ford and Ford Credit are `A+', and the ratings for Ford's preferred stock, the Trust Originated Preferred Securities issued by Ford Motor Company Capital Trust I, and Ford Credit's subordinated notes are `A'. The commercial paper ratings for Ford Credit and its European subsidiary, FCE Bank plc, are `F1'.Ford had $11.5 billion of total manufacturing debt and mandatorily redeemable preferred securities outstanding at June 30, 2000, while Ford Credit had $141.0 billion in debt, including $37.3 billion of commercial paper.
The ratings were previously affirmed in April 2000 when Ford announced a plan to distribute $10 billion to shareholders. Since only $5.7 billion was distributed upon completion of that plan, Fitch does not view the $5 billion in share repurchases as a change in Ford's long-term financial strategy. The ratings continue to assume that Ford will maintain cash reserves of roughly $15 billion as cyclical protection and that cash beyond those levels would be used for strategic options such as acquisitions and shareholder distributions. Ford had $25.6 billion of manufacturing cash on hand on June 30, 2000, and approximately $3 billion in short-term VEBA trusts.
The Ratings Outlook is Stable. The new share repurchase program is targeted for completion by 2001 year-end, and Fitch believes this importantly gives Ford some financial flexibility as major issues such as the Firestone tire recall and the negotiations to acquire Daewoo Motor continue to develop. The Rating Outlook currently incorporates only the extra near-term costs and production cut-backs to execute the current Firestone tire recall; while Fitch believes based on current information that this issue will not have a significant long-term impact on Ford, Fitch acknowledges the potential for related developments that may produce a significant impact and continues to monitor the issue.
Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.