Increase in debt
A further rating downgrade may be painful for bond investors and for a company that wants to restructure its operations
Ford Motor Co. it may be close to re-entering the "junk" box. That's what the bond market says.
The company's debt is being negotiated as if it were speculative, because investors are worried about the impact on the increase in profits from steel tariffs and the slowdown in sales.
The automaker has over USD 150,000 in short and long-term debt worldwide and is one of the 15 largest corporate bond issuers in the US outside the financial sector, the agency Bloomberg pointed out.
Hedge funds have reported the worst monthly results in almost three years at the beginning of 2005, when Ford's rating was reduced to rubbish, as was General Motors Co.
Bob Shanks, Ford's financial director, told a conference last month that he was reporting earnings that the company was involved in maintaining ratings of the investment rating and that he was not going to lose that status again.
The company "moves with a sense of urgency and taking proactive measures to redesign and restructure the company," and over time, "the market will recognize our progress," said spokesman Brad Carroll.
But debt investors are skeptical. An additional refund that the money managers received for holding 4,346% of Ford's debts owed in 2026. Instead of comparable Treasuries, it increased to the typical level of high profitability companies.
The cost of securing Ford's debt for default by credit derivatives increased in October to the highest levels since 2012, after which it fell again. In August, Moody & # 39; s reduced the company's rating to a level above the junk level and stated that further cuts could be made in the medium term.
"It's more likely that it will achieve high performance than not," said Henry Peabody, portfolio manager at Eaton Vance Corp. Boston. "It is a combination of a rather weak strategic position, strategic decisions less than ideal in recent years, a bit of overconfidence and the place where we are in the credit cycle."
Ford is leading a "multilateral war," Peabody added, citing a slowdown in China's sales growth and higher costs in the US. a product of global trade disputes.
Now the company faces new difficulties. FOrd told investors in July that he began restructuring to five years, which could cost him 11 billion dollarsbecause it focuses on higher margin products, such as lorries and sports vehicles, and on leaving the business, as in the case of American sedans.
However, it provided some details about the restructuring plan and has not yet changed the schedule of investors' meeting, which was originally scheduled for September.
Uncertain operations in Asia and Europe prompted Ford to reduce its forecasts for 2018. The company recorded a 50 percent drop in profits in the second quarter, after a fall of almost 40% in the third quarter.
Last month, its shares fell to the lowest level since 2009. Ford's bonds are sold at a risk premium similar to contributions from waste-related automotive companies – such as Allison Transmission Holdings and Dan – and have fallen late. In August, when the Moody & # 39; s agency reduced the company to a level higher than the trash, according to the Bloomberg Intelligence investigation.
The bonds have recently been recovered but are still invested in premiums with higher risk than the Fiat Chrysler rating, which has a "junk" rating, and GM means that investors are convinced that Ford has a higher credit risk.
One of the sources of support when the company is trying to recover is the cash position: as of September 30, Ford had about $ 35 billion in liquidity. It brought a relief to the assessors who thought it was good.
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