Ford Motor Company is planning to raise $2 billion through an issue of 345 million common shares and part of the proceeds would be used to pay a union-managed healthcare trust, says a media report.
"Ford Motor, the only one of the three Detroit carmakers surviving without a government bail-out, has further distanced itself from its troubled rivals with plans for an equity issue that could raise close to $2 billion," the Financial Times said.
According to the daily, Ford said that it would issue up to 345 million in common shares. However, the price of the issue is yet to be determined. The Ford family would remain firmly in control through its holdings of multiple voting stock, it added.
The report said the union-managed healthcare trust is due to be set up early next year under an agreement reached in labour negotiations in 2007. The company is obligated to pay a total of $13 billion to the trust.
But following the deterioration in car markets over the past year, the company reached a deal with the United Auto Workers in March to pay up to half its contribution – $6.5 billion – in shares, rather than cash, it added.
The report stated that the proceeds could enable Ford to pay in cash for a sizeable chunk of its contributions to the union-managed healthcare trust that would otherwise have been made in shares.
The payments would come in instalments, starting in December and ending in 2022. As per the March agreement, the shares to be paid into the trust would have been valued at between $2 and $2.2 each, or just over a third of the current market value, it added.
The Financial Times quoted Alan Mulally, Ford's chief executive as saying that the share issue was "another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet".
Meanwhile, the report said rival Chrysler is restructuring its balance sheet under bankruptcy court protection, while General Motors is widely expected to follow suit before the end of the month.
The FT said that the offering is being led by Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley.
