Ford Motor Co., the second-largest U.S. automaker, is planning its first benchmark offering of fixed-rate bonds maturing in at least 30 years since 1999.
Proceeds from the sale of debt due January 2043 will be used to refinance obligations and to fund its pension plan, according to a person with knowledge of the offering. The securities may be rated Baa3, the lowest level of investment grade by Moody’s Investors Service, said the person, who asked not to be identified because terms aren’t set.
The offering from Ford, which was lifted last year to investment grade at Moody’s and Fitch Ratings, comes as auto sales surge and with borrowing costs touching record lows. Ford’s U.S. light-vehicle sales rose 1.6 percent in December, the company said today, exceeding the 1.2 percent increase forecasted by analysts surveyed by Bloomberg.
Ford’s $1.8 billion of 7.45 percent bonds due July 2031 traded at 128.5 cents on the dollar to yield 5.06 percent yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The automaker issued $4.95 billion of 4.25 percent, 30-year convertible securities in December 2006.
Ford was raised to investment grade by Moody’s in May and by Fitch in April. Standard & Poor’s rates the company’s debt BB+ or the highest level of speculative grade with a positive outlook, according to data compiled by Bloomberg.
Borrowing costs for investment-grade American companies have declined to 2.8 percent from last year’s high of 3.93 percent, according to the Bank of America Merrill Lynch U.S. Corporate index data.
Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley are managing the Dearborn, Michigan-based company’s sale, the person said. General Motors Co. is the top- selling automaker in the U.S.