Autos

Ford Warns on Revenues, Files for New Note Offerings

In a filing Friday morning with the U.S. Securities and Exchange Commission, Ford Motor Co. (NYSE: F) warned that first-quarter revenues are expected to reach about $34 billion, below the FactSet consensus estimate of $35.4 billion. The company also expects to report a net loss of around $2 billion and adjusted earnings before interest and taxes (EBIT) of negative $600 million. Last month Ford withdrew its guidance for fiscal year 2020.

The preliminary prospectus filed Friday indicates that Ford is planning three offerings of senior unsecured notes for unspecified amounts on unspecified terms. In March, Ford fully drew $15.4 billion on its corporate credit and supplemental revolving credit facilities.

While the amounts Ford is seeking are not known, what is known is that the loans won’t come cheap for the automaker, whose debt is now officially junk-rated. Late last month, S&P Global Ratings downgraded its credit rating on Ford from BBB− to BB+. Now, two of the three ratings services have lowered their ratings on Ford’s debt to junk status. Moody’s Investors Service had dropped Ford’s to Ba1 earlier and took the occasion of S&P’s downgrade to lower Ford’s rating further to Ba2. Fitch Ratings has Ford rated at BBB−, the firm’s lowest investment-grade rating.

Ford’s 10-year junk-rated bond issued last November and maturing in 2029 was offered at a coupon of 4.85% and traded at around 72 cents on the dollar Thursday, with a yield of 9.43%. A new high-yield unsecured note from Ford likely will cost the company a few points above the coupon on that November issue.

In the same filing, Ford noted that a BorgWarner Inc. (NYSE: BWA) facility in South Carolina that makes transfer cases for many Ford four-wheel-drive pickups and sport utility vehicles was damaged by a tornado on April 13. Ford’s tooling “was not materially damaged,” the company said, but Ford does not know when the facility will come back online. The affected vehicles include F-150 pickups, Expedition SUVs, SuperDuty pickups, Transit vans and Lincoln Navigator and Aviator SUVs.

The company’s U.S. sales dropped 37% year over year in March and were down nearly 12% compared with first-quarter 2019 sales. Ford’s European sales were down 95% in March and almost 38% in the first quarter of this year.

Ford intends to use proceeds from the note offerings for general corporate purposes. The company noted that the full impact of the COVID-19 pandemic on its financial condition and operating results “will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, and whether the pandemic leads to recessionary conditions in any of our key markets.”

Ford shares traded up about 6.9% early Friday but pulled back some to trade at around $5.07, up 2.6%, in the late morning.