S&P downgrades Ford shares to junk status
Standard & Poor's Financial Services LLC on Wednesday downgraded Ford Motor Co. to junk status as the coronavirus pandemic reduces demand for new vehicles.
S&P put Ford's credit at "BB+" down a notch from "BBB-" and into a non-investment grade. The agency also issued the same rating for Ford's unsecured debt. The Blue Oval last week said it was borrowing $15.4 billion to provide financial flexibility as it shuts down plants in North America, Europe and South America. The downgrade is the company's second this week.
"The coronavirus has delivered supply-side and demand-side shocks to light-vehicle demand," S&P analyst Lawrence Orlowski wrote. "The decision to downgrade Ford Motor Co. investment grade to speculative grade reflects that the company's credit metrics and competitive position became borderline for the investment-grade rating prior to the coronavirus outbreak, and the expected downturn in light-vehicle demand made it unlikely that Ford would maintain the required metrics."
The agency added that over the next 90 days it will continue to watch Ford on how it handles the declining demand in terms of plant closures, how quickly it burns through cash and the company's liquidity position. S&P's negative outlook means there is a 50% chance that it could lower the rating.
Ford's share were falling 1.3% in post-market trading after closing up 8.9%. Fitch Ratings on Monday downgraded Ford to one notch above junk status. It also cited concerns that the virus outbreak could lead to prolonged shutdowns.
Ford referred to its Monday statement that it does not comment on specific actions but that it is managing the health emergency and ensuring the safety of its business, workers and customers.
"We plan to emerge from this crisis as a stronger company that is an engine for economic recovery of the economy in all the markets we serve," the Dearborn automaker said. "We have maintained a strong balance sheet and ample liquidity so that we could weather economic uncertainty and continue to invest in our future, and remain committed to investment grade credit ratings over the long-term.”