Ford Motor's $7 billion term loan was bid as low as 99 7/8 last week as the large size of the issue helped drag it under par, dealers said. It also fell because some investors in the term loan sold their positions to buy into Ford's revolving credit facility, which traded at a deep discount to the term debt, said a dealer.
"People think they can get a better return on the revolver," said one trader. The $11.5 billion revolving credit facility traded much lower than the term loan at 93 1/2-94. The revolver is 25 basis points cheaper than the term loan, but the fact it traded at a large discount made it a worthwhile investment for some, said the dealer. He added the large size of the revolver also caused it to trade down.
Ford's loan-only credit default swaps tightened to 230 from 232-237. A trader said spreads tightened after a positive equity report was published on the company. Morgan Stanley upgraded Ford Motor to overweight from equal weight with a $9.50 target because it thinks Ford has enough liquidity to turn around the business. Citigroup, Goldman Sachs and JPMorgan lead Ford's credit facility. The term loan broke Dec. 12 in the secondary market in the 100 1/8-1/4 range (CIN, 12/18). A Ford spokeswoman declined to comment about the trading of the company's debt.