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Ford bonds show automaker’s ratings may increase

Posted Tuesday, Jul 7, 2009, 10:30 am in Employee News

Bonds of Ford Motor Co. suggest the credit ratings of the only major U.S. automaker to avoid bankruptcy may be poised to rise as its share of the domestic market increases, Bloomberg reported.

Data show that Ford’s 7.45 percent debt due in 2031 yields 8.33 percentage points more than Treasuries, less than the typical spread for bonds rated about Ba3 by Moody’s Investors Service, according to Financial Industry Regulatory Authority and Merrill Lynch & Co. index data. That’s seven rating levels higher than Ford’s Ca grade, Bloomberg said.

“The market is pricing in the sense that, one, we’ve reached a bottom and, two, that Ford is going to be one of the survivors,” Shelly Lombard, an analyst with New York-based bond-research firm Gimme Credit LLC told the news service. “Ratings are always a lagging indicator, so it wouldn’t surprise me if the bonds are pricing in an upgrade.” (Bloomberg)
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