Ford Motor (F) Considers Going Private. What Does this mean for FORD MOTOR CAP TR II (F-PS)?
As reported by Reuters via Yahoo Ford Motor is rumored to be considering going private. What does this mean for The Ford convertible preferred shares - FORD MOTOR CAP TR II (F-PS)?
Normally, companies increase leverage when they go private and any bonds or other liabilities senior to equity experience a decline in credit quality. These securities are convertible preferred shares issued as part of a special trust* in 2002 when Ford Motor** (F) cut its dividend and allowed shareholder to exchange common stock for these higher yielding preference shares. In my opinion, this was done to allow Henry Ford's defendants to keep their income (and lifestyles) by giving up some potentials capital gains. Thus, I believe that these are special protected securities and would not suffer in any capital restructuring that would result from a management, hedge fund or family buyout of the common stock.
Yes, I added slightly to my position in my IRA today.
*From the Notes to the 2003 Ford Motor Company Annual Report:
"Ford Motor Company Capital Trust II, a subsidiary trust ("Trust II"), has outstanding 6.50% Cumulative Convertible Trust Preferred Securities with an aggregate liquidation preference of $5 billion (the "Trust II Preferred Securities"). The sole assets of Trust II are $5,155 million principal amount of 6.50% Junior Subordinated Debentures due 2032 of Ford Motor Company (the "Subordinated Debentures"). At our option, we may redeem the Subordinated Debentures, in whole or in part, on or after January 15, 2007. To the extent we redeem the Subordinated Debentures or upon the maturity of the Subordinated Debentures, Trust II is required to redeem the Trust II Preferred Securities at $50 per share plus accrued and unpaid distributions. We guarantee the payment of all distribution and other payments of the Trust II Preferred Securities to the extent not paid by Trust II, but only if and to the extent we have made a payment of interest or principal on the Subordinated Debentures. "
** In the past, I have criticised Ford Motor Company for not doing enough to be on the cutting edge of new hybrid and other energy efficient technology. I believe it is this risk averse attitude that contibutes to the company's current problems.
Disclosure: I own (F.PR S) Ford Motor Company Capital Trust II 6.5% Cumulative Convertible Trust Preferred Securities. I also own a bear put spread on Ford Motor Co (F) that expires in January 2008. I am long the 7.50 strike put and short the 5.00 strike put. I added slightly to my position in my IRA today.
Disclaimer: Nothing in this blog is meant to be a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult your own investment professional before buying or selling any security.
It would take an act of God to convince me that Ford's stock is worthy right now. About the only thing they have going for them is that unleaded gas futures have been trading well off the past few weeks. As for your IRA, I hope it won't be the bulk of your retirement finances...then again, you can always count on your social security investment; it should be there for you too.
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smaller than a haystack this is. I mirror your remarks about the Ford things increasing in value. My radar senses the reason some of the top execs are on outside now is so they are able to form the required LBO vehicle. I am only now reading blogs, searching for corroboration of my fuzzy thoughts. I find very little in stock message boards or on sites like clearstation.com as most of the people seem to be novices or loadmouths. I am happy and somewhat puzzled to find your blogspot
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how right you could be in your opinion on F outcome. My feelings are that for many reasons the insiders will organize an LBO. each important member who has left F can be a credible member of the "New Ford" and that is required in any takeover. When and whether this occurs I wish to capitalize on. You can help me with a theoretical position. I am thinking I wait for the 2000 F I bought @ 8.05 to rise slightly and then sell various calls to finance some far out puts which will protect my big position in KSK and F-S and F. Additionally I am thinking to buy some far away Calls betting on a takeout premium of $3-$4 I don't need to protect ALL of my ford income items because I do not hesitate when the tape says "get out"
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