DEBT AND COMMITMENTS
Our debt consists of short-term and long-term secured and unsecured debt securities, convertible debt securities, and unsecured and secured borrowings from banks and other lenders. Debt issuances are placed directly by us or through securities dealers or underwriters and are held by institutional and retail investors. In addition, Ford Credit sponsors securitization programs that provide short-term and long-term asset-backed financing through institutional investors in the U.S. and international capital markets.
Debt is recorded on our balance sheet at par value adjusted for unamortized discount or premium and adjustments related to designated fair value hedges (see Note 16 for policy detail). Discounts, premiums, and costs directly related to the issuance of debt are amortized over the life of the debt or to the put date and are recorded in Interest expense using the effective interest method. Gains and losses on the extinguishment of debt are recorded in Automotive interest income and other income/(expense), net and Financial Services other income/(loss), net.
NOTE 15. DEBT AND COMMITMENTS (Continued)
The carrying value of Total Company debt was $114.7 billion and $105.1 billion at December 31, 2013 and 2012, respectively. The following table details the carrying value of our debt by Automotive sector and Financial Services sector (in millions):
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Interest Rates |
| | | | | Average Contractual (a) | | Average Effective (b) |
Automotive Sector | December 31,
2013 | | December 31,
2012 | | December 31,
2013 | | December 31,
2012 | | December 31,
2013 | | December 31,
2012 |
Debt payable within one year | | | | | | | | | | | |
Short-term | $ | 562 |
| | $ | 484 |
| | 1.5 | % | | 1.5 | % | | 1.5 | % | | 1.5 | % |
Long-term payable within one year | |
| | |
| | | | | | | | |
U.S. Department of Energy (“DOE”) Advanced Technology Vehicles Manufacturing (“ATVM”) Incentive Program | 591 |
| | 591 |
| | | | | | | | |
Other debt | 104 |
| | 311 |
| | | | | | | | |
Total debt payable within one year | 1,257 |
| | 1,386 |
| | | | | | | | |
Long-term debt payable after one year | |
| | |
| | | | | | | | |
Public unsecured debt securities (c) | 6,799 |
| | 5,420 |
| | | | | | | | |
Unamortized (discount)/premium | (148 | ) | | (100 | ) | | | | | | | | |
Convertible notes | 908 |
| | 908 |
| | | | | | | | |
Unamortized (discount)/premium | (110 | ) | | (142 | ) | | | | | | | | |
DOE ATVM Incentive Program | 4,424 |
| | 5,014 |
| | | | | | | | |
EIB Credit Facilities (d) | 1,295 |
| | 729 |
| | | | | | | | |
Other debt | 1,255 |
| | 1,048 |
| | | | | | | | |
Unamortized (discount)/premium | 3 |
| | (7 | ) | | | | | | | | |
Total long-term debt payable after one year | 14,426 |
| | 12,870 |
| | 4.4 | % | | 4.6 | % | | 4.7 | % | | 5.1 | % |
Total Automotive sector | $ | 15,683 |
| | $ | 14,256 |
| | | | | | | | |
Fair value of Automotive sector debt (e) | $ | 17,301 |
| | $ | 14,867 |
| | | | | | | | |
| | | | | | | | | | | |
Financial Services Sector | |
| | |
| | | | | | | | |
Short-term debt | |
| | |
| | | | | | | | |
Asset-backed commercial paper | $ | 3,364 |
| | $ | 5,752 |
| | | | | | | | |
Other asset-backed short-term debt | 1,963 |
| | 3,762 |
| | | | | | | | |
Floating rate demand notes | 5,319 |
| | 4,890 |
| | | | | | | | |
Commercial paper | 2,003 |
| | 1,686 |
| | | | | | | | |
Other short-term debt | 2,345 |
| | 1,655 |
| | | | | | | | |
Total short-term debt | 14,994 |
| | 17,745 |
| | 1.5 | % | | 1.1 | % | | 1.5 | % | | 1.1 | % |
Long-term debt | |
| | |
| | | | | | | | |
Unsecured debt | |
| | |
| | | | | | | | |
Notes payable within one year | 4,475 |
| | 5,830 |
| | | | | | | | |
Notes payable after one year | 38,914 |
| | 32,503 |
| | | | | | | | |
Asset-backed debt | |
| | |
| | | | | | | | |
Notes payable within one year | 17,337 |
| | 13,801 |
| | | | | | | | |
Notes payable after one year | 23,273 |
| | 20,266 |
| | | | | | | | |
Unamortized (discount)/premium | (91 | ) | | (134 | ) | | | | | | | | |
Fair value adjustments (f) | 103 |
| | 791 |
| | | | | | | | |
Total long-term debt | 84,011 |
| | 73,057 |
| | 3.1 | % | | 3.8 | % | | 3.3 | % | | 4.1 | % |
Total Financial Services sector | $ | 99,005 |
| | $ | 90,802 |
| | | | | | | | |
Fair value of Financial Services sector debt (e) | $ | 102,399 |
| | $ | 94,578 |
| | | | | | | | |
__________
| |
(a) | Average contractual rates reflect the stated contractual interest rate with the exception of commercial paper, which is issued at a discount. |
| |
(b) | Average effective rates reflect the average contractual interest rate plus amortization of discounts, premiums, and issuance fees. |
| |
(c) | Public unsecured debt securities at December 31, 2013 increased by about $1.4 billion from December 31, 2012, primarily reflecting the issuance of $2 billion of 4.75% Notes due January 15, 2043, offset partially by the redemption of about $600 million of 7.5% Notes due June 10, 2043. |
| |
(d) | Includes debt of Ford Romania which was consolidated on January 1, 2013. See Note 23 for additional information. |
| |
(e) | The fair value of debt includes $377 million and $484 million of Automotive sector short-term debt and $9.7 billion and $8.4 billion of Financial Services sector short-term debt at December 31, 2013 and 2012, respectively, carried at cost which approximates fair value. All debt is categorized within Level 2 of the fair value hierarchy. See Note 4 for additional information. |
| |
(f) | Adjustments related to designated fair value hedges of unsecured debt. |
NOTE 15. DEBT AND COMMITMENTS (Continued)
The fair value of debt presented above reflects interest accrued but not yet paid. Interest accrued on Automotive debt is reported in Automotive other liabilities and deferred revenue and was $195 million and $194 million at
December 31, 2013 and 2012, respectively. Interest accrued on Financial Services debt is reported in Financial Services other liabilities and deferred income and was $633 million and $744 million at December 31, 2013 and 2012, respectively. See Note 4 for fair value methodology.
Maturities
The following table summarizes contractual maturities including capital leases at December 31, 2013 (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Thereafter | | Total Debt Maturities |
Automotive Sector | | | | | | | | | | | | | |
Public unsecured debt securities | $ | — |
| | $ | 165 |
| | $ | — |
| | $ | — |
| | $ | 361 |
| | $ | 6,273 |
| | $ | 6,799 |
|
Convertible notes | — |
| | — |
| | 883 |
| | — |
| | — |
| | 25 |
| | 908 |
|
DOE ATVM Incentive Program | 591 |
| | 591 |
| | 591 |
| | 591 |
| | 591 |
| | 2,060 |
| | 5,015 |
|
Short-term and other debt (a) | 666 |
| | 1,772 |
| | 289 |
| | 73 |
| | 71 |
| | 345 |
| | 3,216 |
|
Total (b) | 1,257 |
| | 2,528 |
| | 1,763 |
| | 664 |
| | 1,023 |
| | 8,703 |
| | 15,938 |
|
| | | | | | | | | | | | | |
Financial Services Sector | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Unsecured debt | 14,142 |
| | 9,048 |
| | 8,955 |
| | 7,445 |
| | 5,612 |
| | 7,854 |
| | 53,056 |
|
Asset-backed debt | 22,664 |
| | 11,994 |
| | 7,836 |
| | 2,746 |
| | 497 |
| | 200 |
| | 45,937 |
|
Total (b) | 36,806 |
| | 21,042 |
| | 16,791 |
| | 10,191 |
| | 6,109 |
| | 8,054 |
| | 98,993 |
|
Total Company (b) | $ | 38,063 |
| | $ | 23,570 |
| | $ | 18,554 |
| | $ | 10,855 |
| | $ | 7,132 |
| | $ | 16,757 |
| | $ | 114,931 |
|
__________
| |
(a) | Primarily non-U.S. affiliate debt and includes the EIB secured loans. |
| |
(b) | Excludes discounts, premiums and adjustments, if any, related to designated fair value hedges of unsecured debt. |
NOTE 15. DEBT AND COMMITMENTS (Continued)
Automotive Sector
Public Unsecured Debt Securities
Our public, nonconvertible unsecured debt securities outstanding were as follows (in millions):
|
| | | | | | | |
| Aggregate Principal Amount Outstanding |
Title of Security | December 31,
2013 | | December 31,
2012 |
4 7/8% Debentures due March 26, 2015 | $ | 165 |
| | $ | 160 |
|
6 1/2% Debentures due August 1, 2018 | 361 |
| | 361 |
|
8 7/8% Debentures due January 15, 2022 | 86 |
| | 86 |
|
6.55% Debentures due October 3, 2022 (a) (e) | — |
| | 15 |
|
7 1/8% Debentures due November 15, 2025 | 209 |
| | 209 |
|
7 1/2% Debentures due August 1, 2026 | 193 |
| | 193 |
|
6 5/8% Debentures due February 15, 2028 | 104 |
| | 104 |
|
6 5/8% Debentures due October 1, 2028 (b) | 638 |
| | 638 |
|
6 3/8% Debentures due February 1, 2029 (b) | 260 |
| | 260 |
|
5.95% Debentures due September 3, 2029 (a) (e) | — |
| | 8 |
|
6.15% Debentures due June 3, 2030 (a) (e) | — |
| | 10 |
|
7.45% GLOBLS due July 16, 2031 (b) | 1,794 |
| | 1,794 |
|
8.900% Debentures due January 15, 2032 | 151 |
| | 151 |
|
9.95% Debentures due February 15, 2032 | 4 |
| | 4 |
|
5.75% Debentures due April 2, 2035 (a) | 40 |
| | 40 |
|
7.50% Notes due June 10, 2043 (c) | — |
| | 593 |
|
7.75% Debentures due June 15, 2043 | 73 |
| | 73 |
|
7.40% Debentures due November 1, 2046 | 398 |
| | 398 |
|
9.980% Debentures due February 15, 2047 | 181 |
| | 181 |
|
7.70% Debentures due May 15, 2097 | 142 |
| | 142 |
|
4.75% Notes due January 15, 2043 | 2,000 |
| | — |
|
Total public unsecured debt securities (d) | $ | 6,799 |
|
| $ | 5,420 |
|
__________
| |
(a) | Unregistered industrial revenue bonds. |
| |
(b) | Listed on the Luxembourg Exchange and on the Singapore Exchange. |
| |
(c) | Listed on the New York Stock Exchange; this debt was redeemed as of February 4, 2013. |
| |
(d) | Excludes 9.215% Debentures due September 15, 2021 with an outstanding balance at December 31, 2013 of $180 million. The proceeds from these securities were on-lent by Ford to Ford Holdings to fund Financial Services activity and are reported as Financial Services debt. |
| |
(e) | Redeemed as of November 25, 2013. |
Convertible Notes
At December 31, 2013, we had outstanding $883 million and $25 million principal amount of 4.25% Senior Convertible Notes due November 15, 2016 (“2016 Convertible Notes”) and December 15, 2036 (“2036 Convertible Notes”), respectively.
Subject to certain limitations relating to the price of Ford Common Stock, the 2016 Convertible Notes are convertible into shares of Ford Common Stock, based on a conversion rate (subject to adjustment) of 112.8203 shares per $1,000 principal amount of 2016 Convertible Notes (which is equal to a conversion price of $8.86 per share). Upon conversion of the 2016 Convertible Notes, we have the right to deliver, in lieu of shares of Ford Common Stock, either cash or a combination of cash and Ford Common Stock. We may terminate the conversion rights of holders under the 2016 Convertible Notes at any time on or after November 20, 2014 if the closing price of Ford Common Stock exceeds 130% of the then-applicable conversion price for 20 trading days during the consecutive 30-trading-day period prior to notice of termination.
NOTE 15. DEBT AND COMMITMENTS (Continued)
In December 2013, we elected to terminate the conversion rights of holders under the 2036 Convertible Notes in accordance with their terms effective as of the close of business on January 21, 2014.
Liability, equity, and if-converted components of our Convertible Notes are summarized as follows (in millions):
|
| | | | | | | | | | | |
| | | | | Total Effective Interest Rate |
| December 31,
2013 | | December 31,
2012 | | December 31,
2013 | | December 31,
2012 |
Liability component | | | | | | | |
4.25% Debentures due November 15, 2016 | $ | 768 |
| | $ | 768 |
| | 9.2% | | 9.2% |
4.25% Debentures due November 15, 2016 (underwriter option) | 115 |
| | 115 |
| | 8.6% | | 8.6% |
Subtotal Convertible Debt due November 15, 2016 | 883 |
| | 883 |
| | | | |
4.25% Debentures due December 15, 2036 | 25 |
| | 25 |
| | 10.5% | | 10.5% |
Unamortized discount | (110 | ) | | (142 | ) | | | | |
Net carrying amount | $ | 798 |
| | $ | 766 |
| | | | |
| | | | | | | |
Equity component of outstanding debt (a) | $ | (225 | ) | | $ | (225 | ) | | | | |
Share value in excess of principal value, if converted (b) | 673 |
| | 384 |
| | | | |
__________
| |
(a) | Recorded in Capital in excess of par value of stock. |
| |
(b) | Based on share price of $15.43 and $12.95 as of December 31, 2013 and 2012, respectively. |
We recognized interest cost on our Convertible Notes as follows (in millions):
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Contractual interest coupon | $ | 39 |
| | $ | 38 |
| | $ | 38 |
|
Amortization of discount | 32 |
| | 30 |
| | 27 |
|
Total interest cost on Convertible Notes | $ | 71 |
| | $ | 68 |
| | $ | 65 |
|
DOE ATVM Incentive Program
In September 2009, we entered into a Loan Arrangement and Reimbursement Agreement with the DOE, pursuant to which the DOE agreed to (i) arrange a 13-year multi-draw term loan facility under the ATVM Program in the aggregate principal amount of up to $5.9 billion, (ii) designate us as a borrower under the ATVM Program, and (iii) cause the Federal Financing Bank to enter into the Note Purchase Agreement for the purchase of notes to be issued by us evidencing such loans. The proceeds of the ATVM loan have been used to finance certain costs for fuel efficient, advanced technology vehicles. The principal amount of the ATVM loan bears interest at a blended rate based on the U.S. Treasury yield curve at the time each draw was made (with the weighted-average interest rate on all such draws still outstanding being about 2.3% per annum).
NOTE 15. DEBT AND COMMITMENTS (Continued)
EIB Credit Facilities
On December 21, 2009, Ford Romania, our operating subsidiary in Romania, entered into a credit facility for an aggregate amount of €400 million (equivalent to $551 million at December 31, 2013) with the EIB (the “EIB Romania Facility”), and on July 12, 2010, Ford Motor Company Limited, our operating subsidiary in the United Kingdom (“Ford of Britain”), entered into a credit facility for an aggregate amount of £450 million (equivalent to $744 million at
December 31, 2013) with the EIB (the “EIB United Kingdom Facility”). The facilities were fully drawn at December 31, 2013. Loans under the EIB Romania Facility and the EIB United Kingdom Facility bear interest at a fixed rate of 4.44% and 4% per annum, respectively. Proceeds of loans drawn under the EIB Romania Facility have been used to fund upgrades to a vehicle plant in Romania, and proceeds of loans drawn under the EIB United Kingdom Facility have been used to fund costs for the research and development of fuel-efficient engines and commercial vehicles with lower emissions, and upgrades to an engine manufacturing plant in the United Kingdom. The loans under each facility are five-year, non-amortizing loans secured by respective guarantees from the governments of Romania and the United Kingdom for approximately 80% and from us for approximately 20% of the outstanding principal amounts. Ford Romania and Ford of Britain have each pledged fixed assets, receivables, and/or inventory to the governments of Romania and the United Kingdom as collateral, and we have pledged 50% of the shares of Ford Romania to the government of Romania and guaranteed Ford of Britain’s obligations to the government of the United Kingdom.
Automotive Credit Facilities
At December 31, 2013, lenders under our revolving credit facility had commitments totaling $10.7 billion, with a November 30, 2017 maturity date, and commitments totaling $50 million with a November 30, 2015 maturity date. The revolving credit facility is unsecured and free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding. The revolving credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the revolving credit facility. If our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of certain subsidiaries will be required.
At December 31, 2013, the utilized portion of the revolving credit facility was $83 million, representing amounts utilized as letters of credit.
At December 31, 2013, we had $802 million of local credit facilities to foreign Automotive affiliates, of which $99 million has been utilized. Of the $802 million of committed credit facilities, $487 million expires in 2014, $277 million expires in 2015, and $38 million thereafter.
Financial Services Sector
Asset-Backed Debt
Ford Credit engages in securitization transactions to fund operations and to maintain liquidity. Ford Credit’s securitization transactions are recorded as asset-backed debt and the associated assets are not de-recognized and continue to be included on our financial statements.
The finance receivables and cash flows related to operating leases that have been included in securitization transactions are only available for payment of the debt and other obligations issued or arising in the securitization transactions. They are not available to pay Ford Credit’s other obligations or the claims of its other creditors. Ford Credit does, however, hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of the securitization transactions. The debt is the obligation of Ford Credit’s consolidated securitization entities and not Ford Credit’s legal obligation or that of its other subsidiaries.
NOTE 15. DEBT AND COMMITMENTS (Continued)
The following table shows the assets and liabilities related to our asset-backed debt arrangements that are included on our financial statements for the years ended December 31 (in billions):
|
| | | | | | | | | | | |
| 2013 |
| Cash and Cash Equivalents | | Finance Receivables, Net and Net Investment in Operating Leases | | Related Debt |
VIEs (a) | | | | | |
Finance receivables | $ | 3.8 |
| | $ | 45.8 |
| | $ | 35.1 |
|
Net investment in operating leases | 0.4 |
| | 8.1 |
| | 5.6 |
|
Total | $ | 4.2 |
| | $ | 53.9 |
| | $ | 40.7 |
|
Non-VIE | |
| | |
| | |
|
Finance receivables (b) | $ | 0.2 |
| | $ | 5.6 |
| | $ | 5.2 |
|
Total securitization transactions | |
| | |
| | |
|
Finance receivables | $ | 4.0 |
| | $ | 51.4 |
| | $ | 40.3 |
|
Net investment in operating leases | 0.4 |
| | 8.1 |
| | 5.6 |
|
Total | $ | 4.4 |
| | $ | 59.5 |
| | $ | 45.9 |
|
| | | | | |
| 2012 |
| Cash and Cash Equivalents | | Finance Receivables, Net and Net Investment in Operating Leases | | Related Debt |
VIEs (a) | |
| | |
| | |
|
Finance receivables | $ | 2.5 |
| | $ | 47.5 |
| | $ | 36.0 |
|
Net investment in operating leases | 0.4 |
| | 6.3 |
| | 4.2 |
|
Total | $ | 2.9 |
| | $ | 53.8 |
| | $ | 40.2 |
|
Non-VIE | |
| | |
| | |
|
Finance receivables (b) | $ | 0.1 |
| | $ | 3.5 |
| | $ | 3.3 |
|
Total securitization transactions | |
| | |
| | |
|
Finance receivables | $ | 2.6 |
| | $ | 51.0 |
| | $ | 39.3 |
|
Net investment in operating leases | 0.4 |
| | 6.3 |
| | 4.2 |
|
Total | $ | 3.0 |
| | $ | 57.3 |
| | $ | 43.5 |
|
__________
| |
(a) | Includes assets to be used to settle liabilities of the consolidated VIEs. See Note 11 for additional information on Financial Services sector VIEs. |
| |
(b) | Certain notes issued by the VIEs to affiliated companies served as collateral for accessing the ECB open market operations program. This external funding of $145 million at December 31, 2012 was not reflected as debt of the VIEs and is excluded from the table above, but was included on our consolidated debt. The finance receivables backing this external funding are included in the table above. |
Financial Services sector asset-backed debt also included $0 and $64 million at December 31, 2013 and 2012, respectively, that is secured by property.
Credit Facilities
At December 31, 2013, Ford Credit and its majority-owned subsidiaries had $1.6 billion of contractually-committed unsecured credit facilities with financial institutions, including FCE Bank plc’s (“FCE”) £720 million (equivalent to $1.2 billion at December 31, 2013) which matures in 2016. At December 31, 2013, $1.2 billion was available for use. The FCE Credit Agreement contains certain covenants, including an obligation for FCE to maintain its ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum, and for the support agreement between FCE and Ford Credit to remain in full force and effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). In addition to customary payment, representation, bankruptcy, and judgment defaults, the FCE Credit Agreement contains cross-payment and cross-acceleration defaults with respect to other debt.
NOTE 15. DEBT AND COMMITMENTS (Continued)
At December 31, 2013, FCAR’s bank liquidity facilities available to support FCAR’s asset-backed commercial paper, subordinated debt, or its purchase of Ford Credit’s asset-backed securities was $3.5 billion, down from $6.3 billion at December 31, 2012. This reduction has been offset by increases in other committed liquidity programs, leaving Ford Credit’s total sources of liquidity largely unchanged.
Committed Liquidity Programs
Ford Credit and its subsidiaries, including FCE, have entered into agreements with a number of bank-sponsored, asset-backed commercial paper conduits (“conduits”) and other financial institutions. Such counterparties are contractually committed, at Ford Credit’s option, to purchase from it eligible retail or wholesale assets or to purchase or make advances under asset-backed securities backed by retail, lease, or wholesale assets for proceeds of up to $29.4 billion ($18.4 billion retail, $5.7 billion wholesale, and $5.3 billion lease assets) at December 31, 2013, of which about $5.4 billion are commitments to FCE. These committed liquidity programs have varying maturity dates, with $24.5 billion (of which about $5 billion relates to FCE commitments) having maturities within the next twelve months and the remaining balance having maturities between January 2015 and December 2015. Ford Credit plans to achieve capacity renewals to protect its global funding needs, optimize capacity utilization, and maintain sufficient liquidity.
Ford Credit’s ability to obtain funding under these programs is subject to having a sufficient amount of assets eligible for these programs as well as its ability to obtain interest rate hedging arrangements for certain securitization transactions. Ford Credit’s capacity in excess of eligible receivables protects it against the risk of lower than planned renewal rates. At December 31, 2013, $14.7 billion of these commitments were in use. These programs are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit Ford Credit’s ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on Ford Credit’s experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.
