Debt and Commitments

12 Months Ended

Dec. 31, 2020

DEBT AND COMMITMENTS

We obtain short-term funding from the issuance of demand notes to retail investors through our demand notes program. We have certain securitization programs that issue short-term asset-backed debt securities that are sold to institutional investors. Bank borrowings by several of our international affiliates in the ordinary course of business are an additional source of short-term funding. We also have a commercial paper program with qualified institutional investors. We obtain long-term debt funding through the issuance of a variety of unsecured and asset-backed debt securities in the United States and international capital markets.

Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.

Debt is reported on our consolidated balance sheets at par value adjusted for unamortized discount or premium, unamortized issuance costs, and adjustments related to designated fair value hedging (see Note 7 for additional information). Debt due within one year at issuance is classified as short-term. Debt due after one year at issuance is classified as long-term. Discounts, premiums, and costs directly related to the issuance of debt are capitalized and amortized over the life of the debt or to the put date and are recorded in Interest expense using the effective interest method. Gains and losses on the extinguishment of debt are recorded in Other income, net.

Debt outstanding and interest rates at December 31 were as follows (in millions):


					Interest Rates
	Debt				Average Contractual				Average Effective
	2019		2020		2019		2020		2019		2020
Short-term debt
Unsecured debt
Floating rate demand notes	$	6,545	$	6,458
Commercial paper	3,560		163
Other short-term debt	2,731		3,777
Asset-backed debt	881		1,031
Total short-term debt	13,717		11,429		2.8	%	1.5	%	2.8	%	1.6	%
Long-term debt
Unsecured debt
Notes payable within one year	15,062		17,185
Notes payable after one year	55,148		54,197
Asset-backed debt
Notes payable within one year	23,609		21,345
Notes payable after one year	32,162		32,276
Unamortized (discount) / premium	7		30
Unamortized issuance costs	(214)		(252)
Fair value adjustments (a)	538		1,467
Total long-term debt	126,312		126,248		3.0	%	2.7	%	3.0	%	2.7	%
Total debt	$	140,029	$	137,677	2.9	%	2.6	%	3.0	%	2.6	%

Fair value of debt	$	141,678	$	139,796
Interest rate characteristics of debt payable after one year
Fixed interest rate	67,090		71,515
Variable interest rate (generally based on LIBOR or other short-term rates)	20,220		14,958
Total payable after one year	$	87,310	$	86,473

__________

(a)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $7 million and $299 million at December 31, 2019 and 2020, respectively. The carrying value of hedged debt was $39.4 billion and $45.5 billion at December 31, 2019 and 2020, respectively.

NOTE 9. DEBT AND COMMITMENTS (Continued)

With the exception of commercial paper, which is issued at a discount, the average contractual rates reflect the stated contractual interest rate. Average effective rates reflect the average contractual interest rate plus amortization of discounts, premiums, and issuance fees.

We measure debt at fair value for purposes of disclosure using quoted prices for our own debt with approximately the same remaining maturities. Where quoted prices are not available, we estimate fair value using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of the debt instruments. For certain short-term debt with an original maturity date of one year or less, we assume that book value is a reasonable approximation of the debt’s fair value. The fair value of debt is categorized within Level 2 of the hierarchy. The fair value of debt includes $12.8 billion and $10.4 billion of short-term debt at December 31, 2019 and 2020, respectively, carried at cost, which approximates fair value. We paid interest of $3.5 billion, $4.1 billion, and $3.4 billion in 2018, 2019, and 2020, respectively, on debt.

Maturities

Debt maturities at December 31, 2020 were as follows (in millions):


	2021 (a)		2022		2023		2024		2025		Thereafter (b)		Total
Unsecured debt	$	27,583	$	13,983	$	10,835	$	10,323	$	9,117	$	9,939	$	81,780
Asset-backed debt	22,376		14,419		7,850		3,148		6,159		700		54,652
Total	49,959		28,402		18,685		13,471		15,276		10,639		136,432
Unamortized (discount) / premium													30
Unamortized issuance costs													(252)
Fair value adjustments													1,467
Total debt													$	137,677

__________

(a)Includes $11,429 million for short-term and $38,530 million for long-term debt.

(b)Matures between 2026 and 2030.

Committed Asset-Backed Facilities

We and our subsidiaries have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits and other financial institutions. Such counterparties are contractually committed, at our option, to purchase from us eligible retail financing receivables or to purchase or make advances under asset-backed securities backed by retail financing or wholesale finance receivables or operating leases for proceeds of up to $38.1 billion ($22.2 billion of retail financing, $4.8 billion of wholesale financing, and $11.1 billion of operating leases) at December 31, 2020. In the United States, we are able to obtain funding within two days for our unutilized capacity in some of our committed asset-backed facilities. These committed facilities have varying maturity dates, with $16.8 billion having maturities within the next twelve months and the remaining balance having maturities through 2022. We plan capacity renewals to protect our global funding needs and to optimize capacity utilization.

NOTE 9. DEBT AND COMMITMENTS (Continued)

Our ability to obtain funding under these facilities is subject to having a sufficient amount of eligible assets as well as our ability to obtain interest rate hedging arrangements for certain facilities. At December 31, 2020, $16.7 billion of these commitments were in use and we had $3.1 billion of asset-backed capacity that was in excess of eligible receivables primarily due to decline in wholesale asset balances. These programs are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.

As of December 31, 2020, Ford Bank GmbH (“Ford Bank”) had liquidity in the form of €104 million (equivalent to $128 million) of senior ABS notes eligible for collateral in the European Central Bank’s monetary policy programs.

Unsecured Credit Facilities

At December 31, 2020, we and our majority-owned subsidiaries had $2.5 billion of contractually committed unsecured credit facilities with financial institutions, including the FCE Bank plc (“FCE”) Credit Agreement and the Ford Bank Credit Agreement. At December 31, 2020, $2.0 billion was available for use.

FCE’s £780 million (equivalent to $1,066 million at December 31, 2020) syndicated credit facility (the “FCE Credit Agreement”) and Ford Bank’s €240 million (equivalent to $294 million at December 31, 2020) syndicated credit facility (the “Ford Bank Credit Agreement”) both mature in 2023, except for £95 million of the FCE Credit Agreement that matures in 2022. At December 31, 2020, all £780 million under the FCE Credit Agreement and all €240 million under the Ford Bank Credit Agreement were available for use.

Both the FCE Credit Agreement and Ford Bank Credit Agreement contain certain covenants, including an obligation for FCE and Ford Bank to maintain their ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum. The FCE Credit Agreement requires the support agreement between FCE and Ford Credit to remain in effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). The Ford Bank Credit Agreement requires a guarantee of Ford Bank’s obligations under the agreement, provided by Ford Credit, to remain in effect.