Ford’s return to investment-grade status has pulled about $67 billion out of the junk-bond market

Ford Motor Co.’s return to the investment-grade market has removed billions of dollars from the high-yield market in a single day.

In total, about $67 billion of Ford Motor’s outstanding bonds are now investment grade, according to data solutions provider BondCliQ Media Services.

That comes after S&P Global Ratings upgraded Ford Motor Co.’s rating to BBB- late Monday, restoring it to investment grade after it was lowered into junk in 2020. Ford Credit, the company’s finance arm, was not included in the upgrade.

Fitch already returned its rating on Ford to investment grade in September, while Moody’s continues to rate it as speculative grade. The company needs two of the three ratings agencies to deem it investment grade to fully return it to that status.

S&P’s move coming right after weaker-than-expected quarterly earnings and uncertainty about its recent deal with the UAW surprised investors.

S&P said it expects the car maker’s EBITDA margins to exceed its target of 8% and that it would have adequate cushion in 2024 and 2025 given strong momentum in its commercial vehicle franchise and gradual cost reduction.

The company’s cash balance of about $29 billion as of Sept. 30, and liquidity of about $51 billion gives it ample leeway to compete in end markets, said the rating agency.

The following chart shows Ford’s maturity stack. The company has a lot of debt that matures in the next few years, peaking at about $14 billion in 2026. It will now be able to refinance at lower rates and tap deeper pools of capital.


Outstanding newly upgraded Ford Motor Co. debt (USD) by maturity year. Source: BondCliQ Media Services

The next chart shows the total outstanding debt that is now investment grade.


Ford Motor Co. total debt outstanding. Source: BondCliQ Media Services

Ford’s stock
F,
+0.92%
,
meanwhile, was up 1.2% Wednesday, but has fallen 15% in the year to date, while the S&P 500
SPX
has gained 9%.

See now: Ford Motor’s credit restored to investment grade after S&P upgrade

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