Bonds issued by Ford (F) – Get Report was reduced to junk by S&P Global Ratings as the coronavirus pandemic causes a shock never before seen in the global automotive sector, hitting the already suffering 117-year-old automaker.
S&P has downgraded Ford’s credit rating by one level to BB + and could further reduce it, according to a statement. The move follows Moody’s investor service, which dropped its Ford debt rating for the second time in six months this week.
Ford is one of many automakers facing what Moody’s called an unprecedented “credit shock” as the coronavirus epidemic hits the global economy, forcing consumers and businesses to move away from their cars and trucks and forcing car manufacturers such as Ford, General Motors (GM) – Get the report, Fiat Chrysler (FCAU) – Get reports and others to get away from their production facilities.
However, Ford is particularly vulnerable due to the problems it experienced while performing a $ 11 billion restructuring that has not yet improved performance, according to analysts.
With around $ 27 billion of debt maturities by the end of 2021 and, at the moment, access to unsecured markets is poor, according to reports, bondholders may have to consider structural subordination.
“The stress of closing all a company’s factories differs from that of a conventional recession in recession,” said S&P, pointing out that the arrests mean that Ford is not generating the revenue it needs to cover its costs.
“The takings rate, even for a few months, could be faster than during a typical recession,” said S&P.
Meanwhile, Ford earlier this week announced that it was partnering with General Electric (GE) – Get report, 3M (MMM) – Get the United Auto Workers report and union for the production of Purified Air Respirators for Healthcare Professionals.
Ford shares fell 4.82% to $ 5.13 in primary market trading Thursday. The stock has fallen by over 40% this year.