Ford debt raised by S&P on improved image

Ford Motor Co.’s credit rating was raised two levels by Standard & Poor’s because of expectations the company will remain profitable and signs that customers have a better impression of the automaker’s vehicles.

The rating was raised to B+, the fourth level below investment-grade, from B-, S&P said today in a statement. The outlook is positive.

Ford has “substantial” cash balances and likely will continue to generate free operating cash flow, the ratings firm said. The retail market has an “improved perception” of Ford’s vehicles and its efforts to introduce more fuel-efficient models in the next few years, S&P said.

“It’s a step in the right direction,” said Kirk Ludtke, senior vice president of CRT Capital Group in Stamford, Connecticut. “It was largely anticipated. It will be a while before they get back to investment grade.”

Ford, based in Dearborn, Michigan, rose 36 cents, or 2.8 percent, to $13.13 at 2:18 p.m. in New York Stock Exchange composite trading. The shares gained 28 percent this year before today.

Ford’s 7.45 percent notes due in July 2031 rose 1 cent to 98 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The yield fell to 7.64 percent from 7.74 percent.

Ford Debt

Ford has more debt than its U.S. rivals because it borrowed $23 billion in late 2006, before credit markets froze, helping the company avoid the bankruptcies that befell General Motors Corp. and Chrysler LLC. The borrowing left Ford with obligations that Chief Executive Officer Alan Mulally says now put it at a competitive disadvantage.

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