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You are here: Home / Star Business Journal / It’s 2005 all over again as Ford teeters on the edge of junk

It’s 2005 all over again as Ford teeters on the edge of junk

November 9, 2018 thestar Leave a Comment

By Molly Smith Bloomberg Fri., Nov. 9, 2018 Ford Motor Co. could be close to getting junked again. That’s what the bond market is saying. The company’s debt is trading like it’s speculative grade, as investors worry about how higher steel tariffs and slowing sales will weigh on its profits. Ford is rated one step above junk by Moody’s Investors Service and two steps by S&P Global Ratings. Any downgrade could be painful for bond investors, and for the company. The automaker has more than $150 billion (U.S.) of short- and long-term debt globally, and is one of the 15 biggest corporate bond issuers in the U.S. outside the financial sector. Hedge funds turned in their worst monthly performance in nearly three years in the first part of 2005, when Ford was cut to junk along with General Motors Co. Bob Shanks, Ford’s chief financial officer, said on an earnings call last month that the company is committed to maintaining its investment-grade ratings, and doesn’t intend to lose that status again. The company is “moving with a sense of urgency and taking proactive steps to redesign and restructure the business,” and over time “the market will recognize our progress,” spokesman Brad Carroll said. Article Continued Below But debt investors are skeptical. The extra yield that money managers get for holding Ford’s 4.346 per cent bonds due 2026 rather than similar Treasuries jumped to levels typical of high-yield companies. The cost of protecting Ford’s debt against default using credit derivatives rose… [Read full story]




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