Ford 2009 Annual Report Download - page 43

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2009 Annual Report 41
Debt Reduction Actions. We undertook the following transactions during the first half of 2009, which reduced our
Automotive debt by a total of $10.1 billion principal amount (with a carrying value of $8.5 billion):
• A private market transaction, completed in January 2009, pursuant to which we purchased $165 million principal
amount of our outstanding unsecured notes for $37 million in cash.
• A cash tender offer by Ford Credit for our secured term loan under the Credit Agreement, pursuant to which Ford
Credit purchased from lenders thereof $2.2 billion principal amount of the secured term loan for an aggregate cost of
$1.1 billion (including transaction costs). This transaction settled on March 27, 2009, following which, consistent with
previously-announced plans to return capital from Ford Credit to us, Ford Credit distributed the repurchased secured
term loan to its immediate parent, Ford Holdings, whereupon the repurchased secured term loan was forgiven.
• A cash tender offer by Ford Credit for our unsecured notes, pursuant to which Ford Credit purchased $3.4 billion
principal amount of debt securities for an aggregate cost of $1.1 billion (including transaction costs). This transaction
settled on April 8, 2009, following which Ford Credit transferred the repurchased debt securities to us in satisfaction
of $1.1 billion of Ford Credit's tax liabilities to us. Approximately $5.6 billion aggregate principal amount of our
unsecured notes (including about $100 million of industrial revenue bonds) remains outstanding.
• An exchange offer by us for our 4.25% Senior Convertible Notes due December 15, 2036 ("2036 Convertible
Notes"), pursuant to which $4.3 billion principal amount of 2036 Convertible Notes was exchanged for an aggregate
of 468 million shares of Ford Common Stock and $344 million in cash ($80 in cash per $1,000 principal amount of
2036 Convertible Notes exchanged). This transaction settled on April 8, 2009. An aggregate principal amount of
$579 million of 2036 Convertible Notes remains outstanding with a carrying value of approximately $400 million.
Amendment to UAW Retiree Health Care Settlement Agreement. As disclosed in our Current Report on Form 8-K
dated July 22, 2009 ("July 2009 Form 8-K Report"), on July 23, 2009, we entered into an amendment to the UAW Retiree
Health Care Settlement Agreement dated March 28, 2008 (the "Original Settlement Agreement") among and between us,
the UAW, and certain class representatives, on behalf of the class of plaintiffs as set forth therein. The Original Settlement
Agreement established the UAW Retiree Medical Benefits Trust as a new VEBA trust (the "UAW VEBA Trust") that on
December 31, 2009 would assume the obligation to provide retiree health care benefits to eligible active and retired UAW
Ford hourly employees and their eligible spouses, surviving spouses and dependents.
Pursuant to the Original Settlement Agreement, in April 2008, we issued to VEBA-F Holdings LLC, a then-wholly owned
subsidiary of ours (the "LLC"): (a) $3.3 billion aggregate principal amount of 5.75% Convertible Notes Due
January 1, 2013 (the "Convertible Notes"); (b) a $3 billion aggregate principal amount 9.50% Second Lien Term Note Due
January 1, 2018 (the "Term Note") and a corresponding guaranty issued by certain subsidiary guarantors (the "Term Note
Guaranty"); and (c) a promissory note dated January 5, 2009 in an aggregate principal amount of $2.3 billion, which is
equal to the market value of the assets in the TAA held by the LLC on December 31, 2008 (the "TAA Note" and, together
with the Convertible Notes, the Term Note and the Term Note Guaranty, the "Old Securities").
The amendment to the Original Settlement Agreement (the "Amended Settlement Agreement"), and the forms of the
New Securities, the Exchange Agreement and the Registration Rights Agreement (each as defined below), were filed as
exhibits to the July 2009 Form 8-K Report. The Amended Settlement Agreement changed the Original Settlement
Agreement to provide for smoothing of payment obligations and to give us the option to use Ford Common Stock to satisfy
up to approximately 50% of our future payment obligations to the UAW VEBA Trust.
The Amended Settlement Agreement was approved by the U.S. District Court for the Eastern District of Michigan on
November 9, 2009. On December 8, 2009, the U.S. Department of Labor published in the Federal Register a Notice of
Proposed Individual Exemption (the "Exemption") that would be retroactive to December 31, 2009 and would, among other
things, permit the transfer to the UAW VEBA Trust and allow the UAW VEBA Trust to hold the New Securities (as defined
below). This, along with prior discussions with the U.S. Department of Labor, met the condition under the Amended
Settlement Agreement of obtaining the Exemption or reasonable assurance of retroactive effect thereof satisfactory to Ford
and the UAW VEBA Trust.
On December 11, 2009, in accordance with the Amended Settlement Agreement and pursuant to a Securities
Exchange Agreement dated as of December 11, 2009 among us, the LLC and certain subsidiary guarantors (the
"Exchange Agreement"), we issued to the LLC in exchange for the Old Securities: (i) an Amortizing Guaranteed Secured
Note Maturing June 30, 2022 with an original principal amount of $6.7 billion and with a fair value at December 31, 2009 of
about $4.8 billion ("New Note A") excluding a "true-up amount" (described below); (ii) an Amortizing Guaranteed Secured
Note Maturing June 30, 2022 with an original principal amount of $6.5 billion and with a fair value at December 31, 2009 of
about $4.5 billion ("New Note B" and, together with New Note A, the "New Notes"); (iii) guaranties by certain subsidiary
guarantors of the New Notes, limited to an aggregate of $3 billion of obligations thereunder (the "Guaranties") and
(iv) warrants to purchase 362,391,305 shares of Ford Common Stock, issued pursuant to a Warrant Agreement (the