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Ahead of the Bell: Ford falls after stock offering273 days ago
(AP:NEW YORK) Ford Motor Co. shares fell Tuesday after it said it will publicly offer 300 million shares of common stock.
The price decline came despite Standard & Poor's Ratings Services' mildly positive take on the Dearborn, Mich., car maker's announcement Monday of the stock sale. On March 31 the company had about 2.87 billion shares outstanding.
At Monday's closing price of $6.08 per share, the offering would net the company $1.82 billion.
Ford will use the proceeds of the offering to pay for "general corporate purposes," including funding its Voluntary Employee Beneficiary Association, or VEBA, with cash instead of stock.
Ford owes $6.3 billion to its VEBA by the end of this year. In March, United Auto Workers members approved a new contract that, besides freezing wages and cutting benefits, allows Ford to use stock to make payments to the retiree health care trust.
S&P said Ford's decision to raise cash gives it much-needed financial flexibility.
"In our view, the sale of common stock is mildly positive because, depending upon how much cash is retained by Ford following the contribution to the trust, the offering will somewhat reduce the danger of Ford's cash balances falling to dangerously low levels," S&P said.
"We believe that, in light of very weak global auto sales, cash outflows during 2009 could eventually test the company's ability to maintain sufficient liquidity toward the latter part of 2009 or into 2010."
In premarket trading Tuesday, Ford fell 25 cents, or 4.1 percent, to $5.83.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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