In November, S&P cut Ford’s rating to match Chrysler and GM’s rating of “CCC+”. The next month, Chrysler and GM were demoted to “CC” ratings, while Ford remained at “CCC+”. Based on Ford’s recent announcement that it will ask its bondholders to swap debt for cash or equity, S&P has lowered the automaker’s rating down to “CC”.
“Our downgrades are based on the financial pressure that Ford is under to reduce its debt by retiring debt for less than originally contracted,” said S&P analysts Robert Schulz and Gregg Lemos Stein.
S&P said that the risk of Chrysler, Ford and GM heading into bankruptcy remains high for 2009 and 2010 “because of the dismal state of industry demand and other industry problems, such as the potential for supplier failures.”
Ford’s risk of near-term default could see a modest decrease if its debt restructuring efforts are successful, S&P said.