Ford is going to the debt markets to bolster its liquidity to ensure it can get through the coronavirus pandemic.
Just days after saying it had “options” to bolster its cash reserves, Ford Motor Co. is going to tap the debt markets, but declined to say how much money it would be seeking.
“We have a broad range of options” for obtaining additional financing if needed, a company spokesman said April 13.
The move comes as the automaker said it expects to report a net loss of $2 billion in the first quarter. On Monday, executives said the company would lose $600 million on a pre-tax basis. The news was revealed in an amended filing with the Securities and Exchange Commission about the move to seek additional credit.
(Ford expects to lost $600 million during first quarter.)
Ford CFO Tim Stone said Monday the company had enough cash to get through the third quarter of 2020.
The automaker has already drawn more than $15 billion from two existing lines of credit to try to ride out the downtime related to the global coronavirus pandemic. However, it appears it won’t be enough as the company only has enough cash to get through the third quarter of this year.
As of April 9, the company had $30 billion in cash on its balance sheet, and $70 billion in assets overall at the end of 2019. Now it can add even more debt, in the form of a three-part unsecured debt offering for an amount the company declined to reveal.
The company suffered a tough first quarter due to the pandemic. It’s sales to dealers fell by 21% while its retail and retail sales declined 12.5%. The company’s also shut down all of its North American plants, except for those producing needed medical equipment for first responders and patients.
(Ford COO Farley shuffles executives to accelerate improvement.)
Ford expects total revenue for the first quarter to be about $34 billion, down 15.7% from $40.3 billion a year ago. The company reported a $2.4-billion profit for the same period last year. All of that forced credit ratings agencies Moody’s and Standard & Poor’s to rate the automaker’s credit as junk.
The 2020 Ford F-Series line-up suffered during the first quarter.
All of this adds up to the fact that it’s going to cost Ford a lot of money to get a lot of money.
Ford has not yet completed the close of its first-quarter 2020 books and the preliminary financial data have not been subject to review or other procedures by the company’s independent auditor. The company’s announcement of first-quarter financial results, including estimates of the economic effects of the coronavirus pandemic on the business, is planned for April 28.
(Disastrous fourth quarter hurts Ford’s full-year earnings.)
In March, Ford withdrew all guidance for 2020 financial performance it had given on Feb. 4.