Ford Motor Company is selling off green bonds as a way to take advantage of a credit-market rally. The automaker sold $1.75 billion of debt expected to mature in 10 years and yield 6.1%. This compares to early pricing discussions of around 6.375%, according to a source.
Fitch Ratings assigned the bond a BB+ rating with a positive outlook. The new debt sale is part of the company’s green strategy, which includes spending $50 billion to build two million electric vehicles annually by 2026. The company will use the proceeds to help finance clean transportation projects and its battery electric vehicle portfolio. Funds are expected to be fully allocated by the end of next year.
Bloomberg Intelligence Credit Analyst Joel Levington believes Ford may tap the bond market before its next round of debt maturities next June. A recent revival in the junk-bond market has been spurred by a market rally pushing yields lower.
Levington said Ford’s credit ratings “are on an upward trajectory with a potential to cross back into investment grade in 2023. Credit rating agencies are looking for more consistent free cash flows and manufacturing operation, as well as considering where economic conditions will be next year,” Levington remarked.
Ford reported $2.9 billion in operating cash flow and $40.2 billion in revenue at the end of the second quarter.
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