TEXT-Fitch: Ford rating unaffected by debt transaction

(The following statement was released by the rating agency)

March 4 - Ford Motor Co's (F.N) offer to repurchase or convert certain
senior unsecured notes, convertible notes and senior secured term loan
securities does not affect the current Issuer Default Rating of 'CCC',
according to Fitch Ratings. If the transactions are completed, Fitch would view
the exchange as a mild positive to the company's credit profile.
Interest expense savings are expected to be moderate, but will create more
material savings when combined with potential cost savings from a new labor
agreement and benefits from the restructured financing of the VEBA agreement.
Ford's ability to capitalize on its remaining market capitalization, through
heavy dilution of common shareholders, has moderated the still-extensive damage
to the company's balance sheet and the steep decline in liquidity.
The exchange offer is not considered coercive under Fitch's methodology, as
participation by securities holders is viewed as voluntary, and investors would
be no worse off at this time by declining to participate in the offers.
However, the tender/conversion offers and agreement with the UAW are clearly an
effort to precede the more difficult discussions required at General Motors and
Chrysler. Ford states in a release that "the operating and VEBA-related
agreements would be conditioned on Ford pursuing restructuring actions with
other stakeholders, including meaningful debt reduction over time consistent
with requirements applicable to its domestic competitors under their
government-sponsored restructurings". As a result, Fitch's view could change if
this or alternative debt exchange offers over time do not take place and a
coercive debt exchange were subsequently undertaken in order to achieve
required concessions from the UAW on wage, benefit or VEBA funding, or to
obtain financial support from the federal government. If the tender/conversions
are completed as contemplated, Ford could solidify potential access to the
government standby facility it is seeking, although it is unclear whether these
steps are currently required by the government.
Fitch will review the results of the offers, but currently anticipates that no
action on the IDR will take place. The potential reduction in senior unsecured
debt is also unlikely to result in any changes to the Recovery Ratings at Ford,
as all unsecured debt is currently expected to have minimal recoveries. Fitch
will review the recovery ratings at Ford Credit once the results of the offers
are known.
The Rating Outlook remains Negative, indicating that Fitch could still take a
rating action on the IDR as a result of sharply deteriorating market conditions
and declining liquidity. Ford is projected by Fitch to have minimal excess
liquidity over the next several years, and stabilization of U.S. demand over
the next 12 months along with continued execution on its restructuring and
product plans will be required in order to avoid default. The risk of a
bankruptcy resulting from a collapse of the supply chain or the bankruptcy of
General Motors remains high.
Contact: Mark Oline +1-312-368-2073, Chicago.
(New York Ratings Team)