Is Ford's Junk Bond Buyback Good News For Investors?

After taking on billions in debt to weather the 2020 economic storms of COVID-19, Ford (NYSE: F) announced on Nov. 4 that it's freeing itself from approximately $5 billion worth of junk bonds through an upcoming buyback. The bonds helped save Ford's bacon when the U.S. government enforced shutdowns last year, but those bonds also pushed it below investment-grade rating.

Now, the company aims to win back that rating -- a step potentially helpful in supporting its aggressive electric vehicle (EV) expansion, and likely bullish for investors much sooner. Let's take a closer look at what's happening.

Early last year, when the coronavirus arrived on America's shores and lockdowns began crushing the economy, Ford issued $8 billion in bonds, giving itself a substantial cash reserve to survive the crisis. The bond issue served its purpose in this way, but it also caused corporate credit rating agency Standard & Poor's (S&P) to cut Ford's rating to BB+, a "speculative grade" rating rather than "investment grade."

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Source Fool.com