Bankers give Ford ‘Kiss of Death’
While Congress - Democrats and Republicans alike - twiddle their thumbs and argue over who loves israel more, international bankers prepare to give Ford their kiss of death.
Struggling Ford Motor says it has pledged substantially all of the company’s assets -- including factories, equipment and its highly profitable Ford Motor Credit arm -- to obtain $18 billion in badly needed loans that will help finance its turnaround effort.
It’s the first time in Ford's 103-year history that it has been forced to pledge its core automotive assets as collateral to obtain financing.
But the cost of borrowing money for Ford increased substantially last year after credit rating agencies cut the company’s debt ratings to “junk status.”
Ford’s Chief Financial Officer Don LeClair said recently that given the company’s problems, a secured financing deal was the prudent thing to do.
Chief Executive Alan Mulally, who joined the company from Boeing in October, said shoring up Ford’s balance sheet is one of his first priorities.
I'll bet - just another vampire in pinstripes.
Ford is expected to burn through $8 billion in cash this year, a rate that would deplete its balance sheet in less than three years.
At the end of September, Ford had $23.6 billion in cash, including $3 billion it transferred from a special fund reserved for future employee health care benefits. With the new financing, it now expects to end the year with $38 billion in cash.
The company will use the money to boost its cash cushion in case of recession, pay for plant closings and employee buyouts, [they pay for that!!!] and importantly, to fund product development aimed at winning back lost market share. Ford spends about $7 billion per year on capital expenditures, which includes vehicle development.
It'll never happen - this baby's going down.
Citigroup Corporate and Investment Banking, Goldman Sachs Credit Partners and J.P. Morgan Securities arranged the financing.
The usual suspects.
Former Ford director Robert Rubin, chairman of Citigroup’s executive committee, resigned from Ford’s board earlier this year, citing a potential conflict of interest.
It's not just conflict of interest - the man's bailing out before it goes under!
J.P. Morgan automotive analyst Himanshu Patel says the financing deal shows that Ford is bracing itself for “sizable cash burn” in 2007, but that the magnitude of the transaction will significantly boost the company’s liquidity and should reduce [not eliminate] any lingering fears of bankruptcy.
Patel adds that the size of the deal reduces the likelihood that Ford will follow the lead of General Motors and sell a portion of its financing arm, Ford Motor Credit. GM is selling 51% of General Motors Acceptance Corp. to a group of investors led by Cerebus Capital Management.
What the hell are they talking about???
According to this report, the loans are partly secured by the financing arm - there's nothing left to sell!
