Restructuring & Reorganization
Selected Transactions
 

Date
April 3, 2009

Company Description
Ford Motor Company (“Ford” or the “Company”) designs, develops, manufactures and services cars and trucks worldwide. The Company has significant international operations throughout Europe, Asia and South America. Ford Motor Credit Company (“FMCC”) provides retail and wholesale automotive financing products to dealers, customers and leasing companies worldwide.

Situation Overview
The domestic automotive sector faced historical challenges in late 2008 and in 2009. At December 31, 2008, Ford had significant financial leverage, with over $35 billion of debt and over $1.8 billion of annual interest expense. Due to the bleak macroeconomic and automotive outlook as well as expectations of continued cash burn, Ford’s existing debt traded at severely discounted prices.

Its main domestic competitors, General Motors and Chrysler, were under government mandate to reduce unsecured indebtedness by at least two-thirds by March 31, 2009.

Ford decided to execute its own balance sheet restructuring to remain competitive with other domestic OEMs, improve its financial profile, ensure long-term viability, and avoid the fate of its domestic rivals. Ford had a number of legal and practical restrictions on the use of cash, incurrence of indebtedness and ability to grant additional liens that complicated its out-of-court balance sheet restructuring.

Transaction Summary
As the automotive crisis came to the forefront of public attention, Ford retained Blackstone in January 2009 as its global restructuring adviser to advise on various deleveraging transactions. As part of the process, the Blackstone team built comprehensive recapitalization and financial models to analyze the impact of the transactions on Ford’s capital structure, liquidity, credit profile and equity value. Blackstone advised Ford on structuring two tender offers and a 3(a)9 exchange designed to reduce unsecured indebtedness and alleviate near-term secured maturities.

In order to execute its deleveraging transaction, it became clear that Ford needed to negotiate with the United Autoworkers (“UAW”) to modify the 2007 Collective Bargaining Agreement (“CBA”), including a restructuring of the VEBA trust to smooth its payment obligations and to allow Ford the option to use Ford common stock to satisfy up to approximately 50% of its future payment obligations to the VEBA trust. Blackstone was instrumental in successful negotiations with the UAW. These modifications to the VEBA trust structure resulted in significant cash cost savings and improved liquidity.

On April 3, 2009, the Company's subsidiary, Ford Motor Credit Company successfully tendered for $2.2 billion of the Company's secured term loan and $3.4 billion of its unsecured publicly traded debt securities and the Company successfully exchanged cash and stock for $4.3 billion of its unsecured convertible notes. As a result of this complex set of transactions, Ford reduced its total indebtedness by $9.9 billion and eliminated $556 million of annual interest expense with $2.4 billion of cash and 468 million shares of Ford stock.

The deleveraging transactions positioned Ford to capitalize on its relative health. The equity capital markets are now open for the Company as its market capitalization has expanded significantly. Moreover, market share gains continue as consumer sentiment towards the Company continues improving due to its quality products and improved financial position.

The Company remains the only domestic automaker to refrain from accepting Government loans and to avoid Chapter 11. The Company has been praised by the White House as well as members of the House and Senate for executing an extremely successful balance sheet restructuring without any Government assistance.

Blackstone won the 2009 Americas Restructuring Deal of the Year Award from the International Financing Review (IFR) for the transaction.


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