Reports: Ford preparing to offer $1bn green bond as part of EV transition plan
The Ford Motor Company has confirmed plans to retire up to $5bn of its existing high-interest bonds, issued to help it weather the Covid-19 pandemic, and to launch its first green bonds.
The automotive giant issued $8bn in emergency bonds last spring, at the start of the pandemic. Ford will now be buying back much of this total, as well as some older bonds, as it seeks to upgrade its credit rating and accelerate its electric vehicle (EV) plans. This move was confirmed by Ford’s treasurer Dave Webb in a media briefing late on Thursday (4 November).
Webb confirmed that Ford intends to launch its inaugural green bond following the repurchase, with plans for a $1bn facility with a ten-year maturity. The green bond will have interest rates of 3.5-4%, far lower than the 8-9.5% rates on the so-called “Covid bonds” launched in 2020.
The green bond will primarily be used to finance Ford’s EV transition plans. Ford announced plans to invest at least $22bn globally in EVs by the end of 2025 earlier this year, and has since increased the pledge to $30bn. The first $11.4bn allocation was made in September, to two new battery factories and an R&D “mega campus”.
Ford is notably ending the sale of non-electric vehicles in Europe by the end of the decade. More ambitious EV pledges are also under development for its markets in China and the US, but neither of these markets has a policy for ICE vehicle sale phase-outs in the mid-term yet, and sales of pickup trucks and SUVs remain more popular in the US than Ford’s other markets.
A financing framework for the bond was confirmed by Webb, also, as under development. The framework will include a taxonomy on which activities can be supported by green and sustainability bonds. It will also detail Ford’s plans to access other new sources of capital, beyond the initial green bond issuance.
Ford’s announcement coincides with the ongoing UN COP26 summit in Glasgow.
The Climate Bonds Initiative recently released an updated forecast projecting that global green bond issuance is likely to pass the half-a-trillion-dollar mark this year and that the possibility of issuance surpassing $1trn in 2023 is strong. The US is the largest market for global, green and sustainability bond issuance. It took 17% of the global share in the first half of 2021.
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