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Ford prepays into health fund

January 5, 2010

Ford prepays into health fund

BLOOMBERG NEWS

Ford said it prepaid $500 million as part of the transfer of UAW retiree health care liabilities to a union-run trust fund, in a sign of the company’s financial confidence.

The amount was in addition to scheduled Dec. 31 payments of $2.01 billion on notes that went to the fund, the automaker said Monday.

Ford said the trust got a total of $17.3 billion in notes, cash and securities from the company, and didn’t give an amount for the liabilities the fund assumed.

The Voluntary Employee Beneficiary Association was part of the 2007 contract reached by Ford and the UAW. The union also agreed to such funds to take over retiree health care liabilities from General Motors and Chrysler.

"We have removed a substantial health care liability from our balance sheet and have significantly reduced health care expenses," Ford Chief Financial Officer Lewis Booth said in a statement. "We also have shown confidence in our liquidity and One Ford plan by prepaying $500 million of debt owed to the VEBA Trust."

Assets transferred to the fund include two notes, with principal amounts of $6.7 billion and $6.5 billion, which Ford said have estimated present values of $4.8 billion and $4.7 billion.

The trust also got cash and securities with an estimated value of $4.12 billion, as well as warrants to buy 362 million Ford shares at $9.20 each that expire at the start of 2013, the company said.

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