Ford Motor said on Friday it had won approval to defer some quarterly payments due on its U.S. Energy Department retooling loan but also said that it will repay the loan on time by June 2022.
In September 2009, Ford was granted a $5.9 billion low-cost government loan, an important source of liquidity following the financial crisis.
The automaker said its loan was modified in June to decrease quarterly principal payments from $148 million to $37 million. The automaker said it has $1.26 billion of remaining principal left on the loan.
An Energy Department spokeswoman said, “the flexibility the Loan Programs Office was able to provide through this loan modification is a good example of what (Energy) Secretary Brouillette meant when he asked for all of the Department’s resources to be supportive of the energy industry during the Covid-19 pandemic”.
The automaker said “with COVID-19 related economic uncertainty remaining, we believe that is worthwhile to further empower our balance sheet and increase liquidity to optimize our financial flexibility”.
Ford noted that if it chooses to pay a dividend, rebuys shares above a certain threshold, or provides security to other lenders it will have to revert to the original payment schedule.
The automaker said Friday that “deferring a portion of the principal until the maturity date will also result in incremental interest cost to Ford, together with the cost to modify the loan. All costs associated with the modification were covered by Ford through a higher interest rate.”
But it also said that, “the financing remains very cost-effective.”