NEW YORK — Ford Motor Co. has obtained commitments from sufficient banks to increase the maturity of at the least 90 p.c of $5.35 billion of revolving loans for one yr, an individual near the financing mentioned.
The automaker has been in discussions with its lenders this month a few one-year extension of its $3.35 billion, three-year primary company revolving credit score facility and its $2 billion, three-year supplemental revolving credit score facility.
JP Morgan leads the deal, in line with thee individuals near the transaction.
Ford is looking for to handle loan maturities for the primary time since downgrades in March eliminated its final investment-grade ranking. The transfer is anticipated to check banks’ willingness to lend to a family identify in an trade that has been hit laborious by the coronavirus pandemic.
Extra lenders may agree to increase earlier than the transaction closes on July 27. The corporate is trying to full the extension forward of its earnings name on July 30, a second individual mentioned.
“They want to be prepared so they can say something good,” the second individual mentioned. “That they were able to extend the liquidity by another year.”
To incentivize banks to comply with the extension, Ford supplied to repay the $3.35 billion three-year primary company revolver it borrowed in March as half of a bigger $15.four billion draw-down underneath its credit score facility, the 2 individuals mentioned.
The corporate is anticipated to make use of cash on its stability sheet to repay the $3.35 billion, three-year loan on July 27 after the modification and extension closes, two individuals acquainted with the transaction mentioned.
As of April 9, Ford had cash of $34.6 billion, together with the revolving credit score draw-downs, and $eight billion in bond issuances, in line with U.S. Securities and Change Fee filings.
“We typically don’t comment on rumor or speculation,” mentioned a Ford spokesperson. A JP Morgan spokesperson declined to remark.
Each the $3.35 billion three-year primary company revolving credit score facility and the $2 billion three-year supplemental revolving credit score facility come due on April 30, 2022, in line with SEC filings. The loans can be prolonged to 2023, two individuals near the transaction mentioned.
The corporate is providing an all-in unfold of 225 foundation factors over Libor, break up between a drawn unfold of 175 foundation factors and an undrawn price of 50 foundation factors for the principle company and supplemental revolving credit score amenities which might be prolonged, two sources mentioned.
All lenders who comply with the extension will obtain a 40 basis-point price on the quantity prolonged.
Lenders who select to not prolong will stay within the present loans at a present all-in unfold of 175 foundation factors over Libor, break up between a drawn unfold of 147.5 foundation factors and an undrawn price of 27.5 foundation factors for the principle company and supplemental revolving credit score amenities.
The corporate is leaving unchanged its totally funded $1.5 billion supplemental time period loan that matures on Dec. 31, 2022, and the $10.05 billion five-year company revolving credit score facility due April 30, 2024.
“It is good. On condition that they don’t seem to be in a simple sector,” the primary individual near the transaction mentioned. “It is a good consequence.”
The charges Ford’s lenders obtained for its $eight billion in bond issuances in April may have helped them get extra snug with the extension. The notion the US authorities supported the automaker by way of the Federal Reserve’s company bond buying program may have been one other optimistic, the supply mentioned.
The corporate first reached out to its JP Morgan-led bank group in February to refinance $15.four billion in revolving credit however in March determined to attract down on the amenities and postponed its refinancing plans as market situations deteriorated, two banking sources mentioned on the time.
The corporate mentioned borrowings could be used to “offset the temporary working capital impacts of the coronavirus-related production shutdowns and to preserve Ford’s financial flexibility,” in line with a March 19 press launch.
Ford reported a 33 p.c drop in U.S. gross sales within the second quarter tied to shutdowns and shelter-in-place orders because of the coronavirus.