Quiver Quantitative - Ford Motor (NYSE:F) 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 (NYSE:BAC), Citigroup (C), JPMorgan (NYSE: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.
This article was originally published on Quiver Quantitative