On December 13, 2024, Ford Motor Company (F, Financial) announced a strategic move to enhance its battery manufacturing capabilities through a significant financial arrangement. The company, in collaboration with SK On Co., Ltd. and SK Battery America, Inc., has entered into a Loan Arrangement and Reimbursement Agreement with the Department of Energy (DOE). This agreement facilitates the Federal Financing Bank's purchase of notes from BlueOval SK, LLC (BOSK), a joint venture among the involved parties, and allows for advances up to $9.63 billion.
The funds are earmarked for the construction of state-of-the-art battery manufacturing plants in Tennessee and Kentucky, marking a substantial investment in the future of electric vehicle technology. As part of the agreement, Ford has committed to guaranteeing 50% of BOSK's payment obligations under the DOE loan.
The agreement includes a Sponsor Support, Share Retention and Subordination Agreement (SSA), which outlines various covenants and conditions. These include both affirmative and negative covenants similar to those in Ford's existing Credit Agreement. Key provisions involve the delivery of financial statements, compliance certificates, and maintaining corporate existence, while also imposing limitations on mergers, liens, and sale-leaseback transactions.
Additionally, the SSA specifies events of default, termed as "Ford Sponsor Entity Defaults," which align closely with Ford's existing credit terms. These defaults cover issues such as materially incorrect representations, covenant breaches, cross-payment defaults, and bankruptcy scenarios, among others.
The BOSK DOE Loan is set to mature in July 2040, providing Ford and its partners with a long-term financial framework to support their ambitious manufacturing goals. This development underscores Ford's commitment to advancing its electric vehicle initiatives and strengthening its position in the automotive industry.
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