Ford, GM Junked at Moody's
Updated from 4:48 p.m. EDT
The debt of
Ford
(F) - Get Ford Motor Company Report
and
GM
(GM) - Get General Motors Company Report
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has been lowered to junk status by bond-rating agency Moody's -- downgrades that affect a total of about $320 billion of debt the automakers have.
Moody's cut Ford's senior unsecured debt one notch to Ba1 from Baa3, and assigned a Ba1 corporate family rating, along with an SGL-1 speculative grade liquidity rating. Moody's also lowered the ratings of Ford Motor Credit's senior unsecured debt to Baa3 from Baa2 and the short-term rating to Prime-3 from Prime-2.
The rating outlook for both companies is negative. The Moody's downgrade affects about $150 billion of Ford debt.
Meanwhile, Moody's cut its ratings on GM's senior unsecured debt two levels to Ba2 from Baa3, and its short-term rating to not prime from Prime-3. The ratings firm also assigned a Ba2 corporate family rating and an SGL-1 speculative grade liquidity rating.
General Motors Acceptance Corp. also got lowered, as Moody's dropped its senior unsecured debt rating to Ba1 from Baa2 and its short-term rating to not prime from Prime-2. The rating outlook for both companies is negative.
Around $170 billion of GM debt is affected by the ratings cuts.
Because of the downgrades, mutual funds that can only hold investment-grade securities will be forced to part with their GM and Ford debt.
Fitch already had GM at a junk rating, and Standard & Poor's had speculative-grade, or junk, ratings on both companies.
