Ford Motor Co. said Monday it plans to get about $18-billion in financing to help fund its restructuring and make up for anticipated losses in its automotive operations over the next two years.
The No. 2 U.S. automaker also said the financing - with its domestic plants and other automotive assets used as collateral - will protect against a recession or other unanticipated events.
Analysts said it makes the possibility of Ford selling its finance arm less likely but could support bigger restructuring efforts. The announcement prompted downgrades on Ford's debt rating.
Ford said a new five-year senior secured revolving credit facility of about $8-billion is intended to replace Ford's existing unsecured credit facilities of $6.3-billion. A senior secured term loan will total about $7-billion, and unsecured capital market transactions will total about $3-billion.
The revolving credit and term loans will be secured by liens on U.S. manufacturing facilities, substantially all of the company's other domestic automotive assets, certain intellectual property, stock in certain subsidiaries - including Ford Motor Credit Co. and Volvo Cars - and up to $4-billion in cash.
Ford spokeswoman Becky Sanch said it was the first time the company had used assets such as plants to secure financing. Earlier this month, Ford had said it was near an announcement on such a deal.
Ford shares fell 36 cents, or 4.23 percent, to close at $8.16 Monday on the New York Stock Exchange.
Following the transactions, Ford said it will have about $38-billion at year's end to fund automotive operations. That includes cash, cash equivalents, loaned and marketable securities, and available credit facilities.
"The additional liquidity should be sufficient to give Ford the ability to fund itself for several years, even with considerable negative cash flow," Rod Lache, an analyst for Deutsche Bank, said in a note to investors.
Ford lost $7-billion during the first nine months of the year and has said it won't return to profitability until 2009.
The company has offered buyouts and early retirement packages to all 75,000 U.S. production workers and plans to shutter 16 plants as part of its Way Forward restructuring plan.
Some Wall Street analysts have questioned why the sale of part of Ford Motor Credit wasn't part of its restructuring update announced in September.
At least two analysts said Monday that using assets such as Ford Motor Credit to back the secured loans makes it less likely that Ford will sell the credit arm.
Following the announcement, Moody's Investors Service downgraded Ford's senior unsecured rating to "Caa1," seven notches below investment grade, from "B3." But Ford's long-term corporate rating was affirmed at "B3."
"The company still faces daunting competitive and market challenges, but this plan would give it some breathing room over the next two years," Bruce Clark, a senior vice president with Moody's, said in a statement.