Ford Motor Company has announced plans to terminate the conversion rights on a particular subset of its notes.
Specifically, The Blue Oval is terminating rights with respect to the 4.25% Senior Convertible Notes due 2036. The termination is effective as of the close of business on January 21, 2014. The Notes were originally issued on December 15, 2006, and roughly $25 million remain outstanding as of December 20, 2013.
Those in possession of the notes can convert theirs to shares of Ford Common Stock. As per Ford Motor Company:
“Holders of the Notes may elect to convert their Notes into shares of Ford Common Stock, par value $.01 per share (“Ford Common Stock”), until the close of business on January 21, 2014 at the current conversion rate of 114.0466 shares of Ford Common Stock for each $1,000 principal amount of Notes converted (equivalent to a conversion price of approximately $8.77 per share of Ford Common Stock). All conversions are subject to Ford’s right under the Notes to elect to settle such conversions in cash, Ford Common Stock or a combination of cash and Ford Common Stock. Ford intends to settle all conversions in cash.”
It seems that the only option that holders of the Notes have is to convert them into Ford Common Stock:
“After the close of business on January 21, 2014, the Notes will no longer be convertible into shares of Ford Common Stock and any holder of the Notes who has not converted such Notes on or before that date will no longer be entitled to convert the Notes into Ford Common Stock.”
The Motrolix Take
Without knowing the original price of the Notes in question, the option to buy some stock in the Ford Motor Company at $8.77 per share sounds like a deal to us, given that it’s currently trading at $15.43 per share on the NYSE.