What happened
Ford Motor Company (F 0.08%) stock ripped higher in Thursday afternoon trading, rising as high as 4.6% by 2:40 p.m. EDT on news of some significant debt-reshuffling in Dearborn.
So what
Specifically, Ford announced that will conduct a series of cash tender offers (i.e., debt buybacks) of what it described as its "COVID bonds," issued to provide a cash cushion through the pandemic last year, as well as various other debt instruments. In total, Ford anticipates spending $5 billion to buy back debentures carrying interest rates ranging from 6.375% to nearly 10%, and with due dates ranging from as early as 2023 to as far out as 2047.
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Simultaneously, Ford announced its intention of selling new debt instruments, which it calls "green" bonds, aimed at raising cash that it will use to pay for investments in "four key areas, including developing battery electric vehicles and clean manufacturing." Initially, the company plans to start off with a $1 billion green bond paying somewhere between 3.5% and 4% interest, reports Reuters, but other bond issuances may follow if the first one goes well.
Now what
Ford noted that its "issuance of 0% convertible notes earlier this year," combined with the proceeds from the planned green bonds, will help provide the cash for the COVID-19 bond repurchases. The fact that the company plans to go ahead with the repurchases, however, regardless of how the first green bond offering performs -- and its willingness to retire debt early when some of its debts won't come due for more than a quarter-century suggests Ford has little doubt in the near-term strength of its finances, which certainly bolstered investor confidence today.
Whether or not that confidence proves well founded, the fact that the company is trading interest rates of up to 10% for interest rates as low as 4%, 3.5%, or even 0%, is unqualified good news.
