Aside from investing $50 billion in EVs with an goal of producing two million annually by 2026, Ford Motor Company also recently launched a new sustainable financing framework to fund future projects responsibly, an effort that was later recognized by the Climate Bonds Initiative after it became the largest-ever green bond from a non-financial U.S. corporation. Now, a new Ford green bond has been issued to fund future vehicle development as well, according to The Detroit News.
This new Ford green bond is a 10-year unsecured entity with a yield of around 6.4 percent, which is a bit higher than the 5.97 percent yield of the average BB tier that this bond exists in. In fact, Fitch Ratings gave the bond a preliminary rating of BB+ based on the fact that Ford’s profitability for the year is on track to improve given the company’s execution of its Ford+ plan. Fitch did note that Ford faces a number of supply chain challenges, however, as well as inflationary pressures.
The proceeds collected from this new bond will be used to fund Ford’s various green projects, with the net proceeds going specifically to the design, development, and manufacturing of all-electric vehicles, a well as other clean transportation projects. That process is expected to be completed by the end of 2023, at which time all of the proceeds will be allocated.
This junk-rated green sale is Ford’s first since June, and its first green offering since last year’s $2.5 billion dollar bond. It’s likely that it won’t be the last in the coming year or so, however. “Ford’s credit ratings are on an upward trajectory with a potential to cross back into investment grade in 2023,” said Bloomberg Intelligence credit analyst Joel Levington. “Credit rating agencies are looking for more consistent free cash flows and manufacturing operations, as well as considering where economic conditions will be next year.”