Ford Motor Credit, the financing arm of Ford (F), is taking advantage of the post-Fed decision climate, launching its first investment-grade bond sale since it was reinstated as a blue-chip entity. The automaker's return to this esteemed status comes after S&P Global Ratings elevated the company's rating earlier in the week, rewarding Ford's improving financial health with a bump up to BBB- from BB+. This rating upgrade follows a descent into junk territory in 2020 and is likely to reduce Ford's borrowing costs significantly. The bond sale, which may include up to two parts with a 10-year note option, is set against a backdrop of rising investor confidence, evidenced by a lift in stocks and a dip in Treasury yields, signaling expectations that the Federal Reserve's rate hikes may pause.
The bond offering, led by heavyweights including Bank of America (BAC), Citigroup (C), JPMorgan (JPM), and others, arrives as investment-grade entities are rushing to raise capital in a transforming financial environment. The shift away from the era of cheap money has ushered in more stringent financing conditions, yet Ford seizes a potentially dwindling opportunity to secure fresh funds. This strategic move underlines the broader trend of companies adjusting to a more challenging economic landscape.
Market sentiment around Ford's financial stability appears to be on an upswing as well, with the cost to insure Ford's debt against default dropping post-upgrade, pointing to a collective investor judgment of diminished risk. This optimistic perspective is reinforced by movements in credit risk indicators such as the investment-grade CDX, which tightened following the automaker's rating upgrade, hitting its most robust intraday point since mid-October.
Despite not offering a comment on the bond sale, Ford's foray into investment-grade funding is a clear indicator of its recovery trajectory since the pandemic's peak economic disruptions. The company's financial resurgence, symbolized by this bond issuance, could play a key role in its ongoing efforts to compete in the rapidly evolving automotive industry.
