Ford to withdraw $ 5 billion in high interest debt and issue green bonds

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Ford Motor Co has announced plans to withdraw up to $ 5 billion in high interest debt and tap the rapidly growing “green” bond market to help finance new electric vehicles and extend credit to customers with lower scores.

Ultimately, the automaker aims to regain a quality rating for itself and for Ford Credit, its captive finance subsidiary, which in turn would lower the cost of future borrowing.

During a press briefing, Treasurer Dave Webb said the company was making a cash offer for 8% to 9.5% interest “covid bonds” that it had issued in April 2020, at the start. of the global pandemic.

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Ford initially plans to offer a $ 1 billion green bond at an interest rate of 3.5% to 4%, to replace some of the high coupon bonds and to complement the zero interest convertible debt it has. issued earlier this year.

Some of the money will help fund the automaker’s ambitious plan to convert a significant portion of its global production from fossil-fueled combustion engine vehicles to battery-powered electric vehicles.

The company said it plans to spend at least $ 30 billion by 2025 to design, design and manufacture a wide range of electric vehicles in North America, China and Europe.

Ford is a leading seller of pickup trucks and full-size SUVs, extremely profitable combustion-engine vehicles that continue to be popular with American customers.

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A “sustainable financing framework” announced Thursday will allow Ford to access new sources of capital, including investors supporting environmental, social and governance (ESG) initiatives.

New green bonds would allow Ford Credit to extend funding to customers with lower credit scores, but would require them to purchase electric or hybrid vehicles.

Thursday’s announcement coincides with the United Nations Climate Change Conference (COP26) https://www.reuters.com/business/cop in Glasgow, Scotland and the fifth anniversary of the Paris Climate Agreement . (Reporting by Paul Lienert in Detroit; Editing by David Gregorio)