Ford 2006 Annual Report Download - page 76
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Notes to the Financial Statements
74
NOTE 15. DEBT AND COMMITMENTS (Continued)
company for Volvo Car Corporation (“Volvo”), Ford Motor Company of Canada, Limited (“Ford Canada”) and Grupo Ford
S. de R.L. de C.V. (a Mexican subsidiary); 66% -100% of the stock of all major first tier foreign subsidiaries (including
Volvo); and certain domestic intellectual property, including trademarks.
Covenants. The Credit Agreement requires ongoing compliance with a borrowing base covenant and contains other
restrictive covenants, including a restriction on our ability to pay dividends. The Credit Agreement prohibits the payment
of dividends (other than dividends payable solely in stock) on our Common and Class B Stock, subject to certain limited
exceptions. In addition, the Credit Agreement contains a liquidity covenant requiring us to maintain a minimum of
$4 billion in the aggregate of domestic cash, cash equivalents, loaned and marketable securities and short-term Voluntary
Employee Benefit Association ("VEBA") assets and/or availability under the revolving credit facility.
With respect to the borrowing base covenant, we are required to limit the outstanding amount of debt under the Credit
Agreement as well as certain permitted additional indebtedness secured by the collateral described above such that the
total debt outstanding does not exceed the value of the collateral as calculated in accordance with the Credit Agreement
(the "Borrowing Base value").
The following table provides detail of Borrowing Base values for various categories of collateral (in billions, except
percentages):
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D Based on formulas set forth in the Credit Agreement and not necessarily indicative of fair market value (which could be materially
higher or lower); receivables, inventory, intercompany notes, and property, plant and equipment reflect net book value at
December 31, 2006; equity of Ford Credit is based on its book value at December 31, 2006, and equity in other subsidiaries is based
on a multiple of their two-year average EBITDA less current debt.
E 9DOXHUHIOHFWVLQGHSHQGHQWWKLUGSDUW\YDOXDWLRQRIWUDGHPDUNVRQO\
Based on the Borrowing Base value of $22.5 billion and the total outstanding amount of debt secured by collateral of
$7.4 billion, the resulting collateral coverage ratio is 3.03. Assuming the $11.5 billion revolving credit facility were fully
drawn and the $1.5 billion of non-loan exposure permitted under the facility were fully utilized, the collateral coverage ratio
would have been 1.13.
Events of Default. In addition to customary payment, representation, bankruptcy and judgment defaults, the Credit
Agreement contains cross payment and cross acceleration defaults with respect to other debt for borrowed money and a
change in control default.
Other Automotive Credit Facilities
At December 31, 2006, we had $1.5 billion of other Automotive credit facilities, of which $1.1 billion constituted global
unsecured credit facilities that could be used by any of our direct or indirect majority-owned subsidiaries on a guaranteed
basis. At December 31, 2006, $1.4 billion of these facilities were available for use. All of the global unsecured credit
facilities are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity
limitations and minimum net worth requirements), and credit rating triggers that would limit our ability to obtain funding.