Author:
Gordon Platt
Mexican Homebuilder Cuts Borrowing Costs
Ford Motor Credit, the finance arm of number-two US automaker Ford Motor, sold $1 billion of debt in a two-part offering in late October that produced higher-than-expected yields.
Ford Motor Credit offered yields of 4.375 percentage points more than comparable-maturity US treasury securities for its $500 million of five-year notes.
The 5.5-year notes of General Motors Acceptance Corporation, or GMAC, the financing unit of General Motors, were yielding only about 2.6 percentage points more than treasury securities in secondary market trading on the same day.
Ford Credit also sold $500 million of two-year floating-rate notes with an interest rate of 3.0 percentage points more than the three-month London interbank offered rate.
Deutsche Bank Securities, Barclays Capital and ABN-LaSalle were joint lead managers on the debt sale.
GM’s bonds have performed better than Ford’s in the secondary market in recent weeks, after the world’s largest automaker announced a significant cost-cutting agreement with the United Auto Workers union that will help lower its health-care costs. Ford is expected to announce a similar agreement with the union eventually.
According to GM’s chief financial officer, John Devine, the tentative agreement will lower the automaker’s retiree health-care expenses by about 25%, or $15 billion, over seven years. GM also plans to eliminate 25,000 manufacturing jobs and close several plants by 2008. It also announced that it would sell a controlling interest in GMAC.
GM and Ford are two of the largest issuers of corporate debt, with a total of about $475 billion outstanding, including the bonds of their financing units.
Both of the leading US automakers reported big losses for the third quarter, and Ford said it would announce significant US plant closings and layoffs in January.
Besides high health-care costs, US automakers have been hurt by rising costs of raw materials, excess capacity and intensifying competition from Asian carmakers.
William Clay Ford Jr., chairman and CEO of Ford Motor, says the restructuring plan he will announce in January will apply to salaried workers as well as hourly workers represented by the union.
“This is not a sacrifice that we will ask only the UAW and its members to share,” he said in a conference call after Ford reported a third-quarter loss of $284 million.
Ford Motor Credit, the finance arm of number-two US automaker Ford Motor, sold $1 billion of debt in a two-part offering in late October that produced higher-than-expected yields.
Ford Motor Credit offered yields of 4.375 percentage points more than comparable-maturity US treasury securities for its $500 million of five-year notes.
The 5.5-year notes of General Motors Acceptance Corporation, or GMAC, the financing unit of General Motors, were yielding only about 2.6 percentage points more than treasury securities in secondary market trading on the same day.
Ford Credit also sold $500 million of two-year floating-rate notes with an interest rate of 3.0 percentage points more than the three-month London interbank offered rate.
Deutsche Bank Securities, Barclays Capital and ABN-LaSalle were joint lead managers on the debt sale.
GM’s bonds have performed better than Ford’s in the secondary market in recent weeks, after the world’s largest automaker announced a significant cost-cutting agreement with the United Auto Workers union that will help lower its health-care costs. Ford is expected to announce a similar agreement with the union eventually.
According to GM’s chief financial officer, John Devine, the tentative agreement will lower the automaker’s retiree health-care expenses by about 25%, or $15 billion, over seven years. GM also plans to eliminate 25,000 manufacturing jobs and close several plants by 2008. It also announced that it would sell a controlling interest in GMAC.
GM and Ford are two of the largest issuers of corporate debt, with a total of about $475 billion outstanding, including the bonds of their financing units.
Both of the leading US automakers reported big losses for the third quarter, and Ford said it would announce significant US plant closings and layoffs in January.
Besides high health-care costs, US automakers have been hurt by rising costs of raw materials, excess capacity and intensifying competition from Asian carmakers.
William Clay Ford Jr., chairman and CEO of Ford Motor, says the restructuring plan he will announce in January will apply to salaried workers as well as hourly workers represented by the union.
“This is not a sacrifice that we will ask only the UAW and its members to share,” he said in a conference call after Ford reported a third-quarter loss of $284 million.
| Tribal Bonds |
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The Seminole Tribe of Florida offered $730 million of gaming division bonds in a two-part private placement with institutional investors.
The tribe, which has 3,100 enrolled members, derives more than 90% of its revenue from gaming. The tribe offered $450 million of eight-year notes and $280 million of 15-year notes. The proceeds will be used mainly to refinance two hotel-casino complexes built with tax-exempt bonds, an arrangement that has been criticized by the US Internal Revenue Service. The Seminole tribe owns and operates six casino gaming facilities across Florida, the largest of which are the Tampa and Hollywood Hard Rock properties. The tribe is trying to negotiate a buy-out of its financial obligations to Power Plant Entertainment, its former financial adviser. Meanwhile, the IRS is auditing other Indian casino financings across the country. |
Gordon Platt
