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Bond Market News
Ford Upgraded to BBB- by S&P
October 31, 2023
Ford Motor Company and its subsidiary Ford Motor Credit were upgraded to BBB- from BB+ by S&P. The rating agency expects Ford’s EBITDA margins to rise above its previous target with an “adequate cushion” in 2024 and 2025. It expects EBITDA margins to be above 8% in 2024 and approach 9% in 2025. This comes on the basis that Ford has shown “strong momentum” in its commercial vehicle franchise. Besides, it has also gradually reduced costs by restructuring its loss-making South American operations by shifting it towards an asset-light model. On the financial front, Ford had a cash balance of $29bn as of end-September, with overall liquidity of $51bn. S&P added that Ford’s free operating cash flow (FOCF) is also in-line with its peers and that its pricing power should support its FOCF-to-debt ratio to stay above 15%. It further said that Ford has “solid financial flexibility” to compete the cyclical and disruptive market that it operates in.
Ford’s bonds were trading stable with its 3.25% 2032s at 74, yielding 7.53%.
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