After taking on billions in debt to weather the 2020 economic storms of COVID-19, Ford announced on Nov.
Now, the company aims to win back that rating — a step potentially helpful in supporting its aggressive electric vehicle expansion, and likely bullish for investors much sooner.
Fitch Ratings, the third agency, also downgraded the Blue Oval to BB+ in May, specifically noting that the $8 billion bond issue “will leave the company with higher leverage over the longer term, along with a substantial maturity wall in 2023 when the first $3.5 billion comes due.” With all three main rating agencies cutting Ford’s rating to “speculative” , obtaining additional credit became more difficult and more expensive.
The automotive giant already had a checkered rating history, spending seven years with a junk rating between 2005 and 2012.
4, the Blue Oval’s treasurer David Webb said that “it’s the time to aggressively restructure the balance sheet, lower our interest costs, and really clear the decks for 2022 and beyond,” CNBC reports.
Crucially, escaping the fetters of its junk bonds and associated junk rating will again open Ford up to cash inflows from major institutional investors.
In a big-picture sense, though, the move is even more positive for Fools with the Blue Oval in their portfolios.
Eschewing the half-hearted approach of some traditional automakers to the electric vehicle revolution, Ford aims to have a fifty-fifty split between EVs and gasoline vehicles in its vehicle lineup by the end of the decade.
Ford’s electrification push is arguably its most important current strategy, with Tesla’s more than $1 trillion valuation highlighting the immense potential of EV sales.