Ford Motor Co said on Friday it had won approval to defer some quarterly payments due on its US Energy Department retooling loan, but added it will repay the loan on time by June 2022.
In September 2009, Ford was awarded a $5.9 billion low-cost government loan, an important source of liquidity in the aftermath of the financial crisis.
The second-largest US automaker said its loan was modified in June to reduce quarterly principal payments from $148 million to $37 million. Ford said it has $1.26 billion of remaining principal left on the loan.
An Energy Department spokeswoman said "the flexibility the Loan Programs Office was able to provide through this loan modification is a good example of what (Energy) Secretary Brouillette meant when he asked for all of the Department’s resources to be supportive of the energy industry during the Covid-19 pandemic."
(Also read: Ford posts profit but here's why 2020 predictions remain gloomy)
Ford said "with Covid-19 related economic uncertainty remaining, we believe that is worthwhile to further strengthen our balance sheet and increase liquidity to optimize our financial flexibility."
The company noted that if it opts to pay a dividend, repurchase shares above a certain threshold, or provide security to other lenders it will have to revert to the original payment schedule.
(Also read: UK grants Ford $640 million loan guarantee to preserve exports)
The company said Friday that "deferring a portion of the principal until the maturity date will also result in incremental interest cost to Ford, in addition to the cost to modify the loan. All costs associated with the modification were covered by Ford through a higher interest rate."
But it added, "the financing remains very cost-effective."
Ford shares were down slightly, 0.3% to $6.72.
This story has been published from a wire agency feed without modifications to the text.