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Ford Motor Co. confirmed on Friday that it has applied for and obtained permission from the U.S. Department of Energy to defer debt payments owed on a 2009 government loan.

The action is considered “worrying” for an expert who closely follows bankruptcy trends.

Regulatory documents filed by Ford showed the company owed payments of $ 591 million in 2020, $ 591 million in 2021 and $ 289 million in 2022.

“The fact that Ford Motor Co., a multibillion-dollar organization, finds it necessary to defer repayments on loans of this size would be a worrying sign for their investors,” Charles Elson, director of the Weinberg Center for Corporate Governance, told the University of Delaware.

“They obviously keep the money, but the question is for this relatively small amount for such a large company? You have to ask yourself why,” he said.

Ford confirmed that the company amended the government loan in June to reduce quarterly payments on principal owed from $ 148 million to $ 37 million. Ford also confirmed that there was $ 1.26 billion left in principal and that the deferral will include additional costs involving interest and a higher interest rate.

‘Its good’

Meanwhile, Ford spokesman TR Reid dismissed the concern.

“It’s a very small profitable portion of Ford’s liquidity,” he said. “It is good balance sheet management to reduce interim payments where possible.”

The loan matures in June 2022, Reid said. “We plan to repay the loan in full and on time.”

On Thursday afternoon, the automaker announced a loss of revenue of $ 1.9 billion for the second quarter while forecasting that its finances would continue to present challenges in the months to come, regardless of the coronavirus.

The upcoming launches of the Ford F-150, Bronco Sport and Mustang Mach-E SUVs are costly efforts that will affect results in the second half of 2020, Ford CFO Tim Stone warned during a call with analysts at Wall Street after the results. report has been published.

Ford has reached a deal with the Department of Energy and borrowed $ 5.9 billion under a loan program created to fund projects designed to help vehicles built in the United States meet mileage requirements higher and reduce the United States’ dependence on foreign oil.

Ford vs. Tesla

Ford, Nissan and Tesla are listed as loan recipients under the Advanced Technology Vehicles Manufacturing loan program.

Nissan received $ 1.6 billion for its Tennessee operations and Tesla raised $ 465 million for projects in California. They each took out the loans a year after Ford and paid off all of the debt when the auto industry was booming. Tesla repaid the loan nine years earlier, in May 2013. Nissan was fully repaid in September 2017.

After: Ford took out a $ 6 billion government loan in 2009 – and debt still haunts the company

After: Ford surprise: $ 1.9 billion loss is good news

After: Ford just unveiled the 2021 Bronco: why this new model is different

Ford has suggested that the government’s debt payments are “relatively low” and not alarming. The company renegotiated a number of loans in response to handling the fallout from COVID-19, a decade after the Great Recession.

However, market analyst Jon Gabrielsen said Ford’s stock was “alarming”.

“When a big company has to carry over debts this small, it means how dire their financial situation must be,” Gabrielsen said. “It’s like asking if you can pay for my ham sandwich, my Diet Coke with fries for the rest of the year when we have lunch at work every day.”

The company told Reuters that “deferring part of the principal until the maturity date will also incur additional interest charges for Ford, in addition to the cost of modifying the loan. All costs associated with the modification were covered by Ford through a higher interest rate.

But, Ford told Reuters, “the financing is still very profitable.”

Ford CEO Jim Hackett reassured analysts during the call Thursday that the company is on the right track and confident for the future. He praised the financial situation.

In the first full half of 2020, regulatory documents show Ford recently borrowed $ 44.3 billion and paid off a previous debt of $ 23.3 billion. This reflects a growing debt over the past six months of $ 21 billion, according to a file.

Contact Phoebe Wall Howard: 313-222-6512or [email protected]. Follow her on Twitter @phoebesaid. Read more on Ford and subscribe to our automotive newsletter.

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