Ford 2013 Annual Report Download - page 47

Ford Motor Company | 2013 Annual Report 45
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Cash, Cash Equivalents, and Marketable Securities. At December 31, 2013, Ford Credit’s cash, cash equivalents, and
marketable securities (excluding marketable securities related to insurance activities) totaled $10.8 billion, compared with
$10.9 billion at year-end 2012. In the normal course of its funding activities, Ford Credit may generate more proceeds
than are required for its immediate funding needs. These excess amounts are maintained primarily as highly liquid
investments, which provide liquidity for its short-term funding needs and give it flexibility in the use of its other funding
programs. Ford Credit’s cash, cash equivalents, and marketable securities are held primarily in highly liquid investments,
which provide for anticipated and unanticipated cash needs. Ford Credit’s cash, cash equivalents, and marketable
securities (excluding marketable securities related to insurance activities) primarily include U.S. Treasury obligations,
federal agency securities, bank time deposits with investment-grade institutions and non-U.S. central banks, corporate
investment-grade securities, A-1/P-1 (or higher) rated commercial paper, debt obligations of a select group of non-U.S.
governments, non-U.S. government agencies, supranational institutions, and money market funds that carry the highest
possible ratings. Within Ford Credit’s cash, cash equivalents, and marketable securities, it did not hold investments in
government obligations of Greece, Ireland, Italy, Portugal, or Spain at December 31, 2013. The maturity of these
investments ranges from about 90 days to up to about one year and is adjusted based on market conditions and liquidity
needs. Ford Credit monitors its cash levels and average maturity on a daily basis. Cash, cash equivalents, and
marketable securities include amounts to be used only to support Ford Credit’s securitization transactions of $4.4 billion
and $3 billion at December 31, 2013 and 2012, respectively.
Ford Credit’s substantial liquidity and cash balance have provided it the opportunity to selectively call and repurchase
its unsecured and asset-backed debt through market transactions. In 2013, Ford Credit called an aggregate principal
amount of $163 million (of which none were maturing in 2013) of its unsecured debt.
Committed Liquidity Programs. Ford Credit and its subsidiaries, including FCE, have entered into agreements with a
number of bank-sponsored asset-backed commercial paper conduits (“conduits”) and other financial institutions. Such
counterparties are contractually committed, at Ford Credit’s option, to purchase from Ford Credit eligible retail or
wholesale assets or to purchase or make advances under asset-backed securities backed by retail financing, operating
leases, or wholesale financing assets for proceeds of up to $29.4 billion ($18.4 billion of retail financing, $5.7 billion of
wholesale financing, and $5.3 billion of operating lease assets) at December 31, 2013, of which $5.4 billion are
commitments to FCE. These committed liquidity programs have varying maturity dates, with $24.5 billion (of which $5.0
billion relates to FCE commitments) having maturities within the next twelve months and the remaining balance having
maturities in 2015. Ford Credit plans to achieve capacity renewals to protect its global funding needs, optimize capacity
utilization, and maintain sufficient liquidity.
Ford Credit’s ability to obtain funding under these programs is subject to having a sufficient amount of assets eligible
for these programs as well as its ability to obtain interest rate hedging arrangements for certain securitization transactions.
Ford Credit capacity in excess of eligible receivables protects it against the risk of lower than planned renewal rates. At
December 31, 2013, $14.7 billion of these commitments were in use. These programs are free of material adverse
change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth
requirements), and generally, credit rating triggers that could limit Ford Credit’s ability to obtain funding. However, the
unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond
specified levels. Based on Ford Credit’s experience and knowledge as servicer of the related assets, Ford Credit does
not expect any of these programs to be terminated due to such events.
Credit Facilities. At December 31, 2013, Ford Credit and its majority-owned subsidiaries had $1.6 billion of
contractually committed unsecured credit facilities with financial institutions, including FCE’s £720 million (equivalent to
$1.2 billion at December 31, 2013) syndicated credit facility (the “FCE Credit Agreement”), which matures in 2016. At
December 31, 2013, $1.2 billion was available for use. The FCE Credit Agreement contains certain covenants, including
an obligation for FCE to maintain its ratio of regulatory capital to risk-weighted assets at no less than the applicable
regulatory minimum, and for the support agreement between FCE and Ford Credit to remain in full force and effect (and
enforced by FCE to ensure that its net worth is maintained at no less than $500 million). In addition to customary
payment, representation, bankruptcy, and judgment defaults, the FCE Credit Agreement contains cross-payment and
cross-acceleration defaults with respect to other debt. At December 31, 2013, the FCE Credit Agreement included
£95 million (equivalent to $157 million at December 31, 2013) of commitments from financial institutions based in Italy.
There were no commitments from financial institutions in Greece, Ireland, Portugal, or Spain.
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