Ford Motor Co. said on Monday it plans to borrow $18 billion (9.3 billion pounds) by pledging assets as collateral for loans, an unprecedented requirement that highlights its worsening financial condition.

The plan, which prompted ratings cuts by all three rating agencies, is expected to finance Ford's efforts to rescue a North American operation that has lost $12.39 billion before taxes and including special items since January 2005.

The new debt includes about $8 billion in secured revolving credit that replaces an existing unsecured credit line of $6.3 billion, and a secured loan of about $7 billion, the company said. This is the first time Ford has used collateral for loans, Ford spokeswoman Becky Sanch said.

"They're at the point where they have to pledge assets for loans," said Glenn Reynolds, chief executive officer of New York-based research firm CreditSights Inc., who said it was an indication investors view Ford as a "very high-risk" company.

"This confirms they see nothing but trouble ahead because they're front-loading their debt now," Reynolds said.

The borrowing, which also includes $3 billion in unsecured notes that can be converted into Ford common stock, will be backed by assets including U.S. auto plants, stock of subsidiaries including Ford Motor Credit Co. and Volvo, and up to $4 billion of domestic cash, the company said.

Kevin Tynan, an analyst with Argus Research in New York, said the funding will help Ford with the cash requirements of its overhaul.

Ford "has to deal with not only the restructuring and buyouts but also costs associated with research and development of new products," Tynan said.

Citigroup Inc., Goldman Sachs and J.P. Morgan Securities Inc. are arranging the financing, the company said.

RESTRUCTURING

Ford, the No. 2 U.S. automaker, has lost about $7 billion in the first nine months of 2006. It said in October it may consider new funding secured by its automotive assets to protect its cash position as it pays the bill to close 16 plants and cut up to 45,000 jobs.

Ford is offering buyouts to all of its 75,000 unionised workers in the United States to reduce its factory staff by nearly half. The bulk of hourly workers are taking buyouts to leave the company in the first and second quarter of 2007.

Ford has said the restructuring would reduce its cash to near $20 billion by the end of the year and said it expected its cash flow to remain negative in the coming few years.

Upon completion of the transactions, Ford expects to have liquidity of about $38 billion at the end of 2006, Ford said.

Ford is selling its British luxury brand Aston Martin and is preparing a short list of bidders, but does not expect to close a sale this year.

Ford Chief Financial Officer Don Leclair in October reiterated that the company has no plans to sell its finance arm, calling Ford Credit a "core asset, a strategic asset."

"They've chosen their finance strategy and they've chosen to embrace debt rather than asset sales," Reynolds said.

BONDS WEAKEN

Ford's 7.45 percent bonds due in 2031 fell almost half a cent on the dollar to 79 cents, matching the lowest level this month, yielding 9.7 percent, according to MarketAxess.

Ford credit spreads were little changed. Ford's credit default swaps are around 567 basis points, or $567,000 per year for five years to insure $10 million in debt.

All three major credit-rating agencies cut their senior unsecured debt ratings on Ford after the announcement.

Moody's Investors Service on Monday cut Ford's unsecured rating to Caa1, seven levels below investment grade. Fitch Ratings cut those ratings to "B," five steps below, while Standard & Poor's lowered Ford's unsecured debt rating two notches to "CCC-plus," or seven steps below.

"Completing this financing would considerably strengthen Ford's ability to fund the large cash requirements it will face through 2008," Moody's analyst Bruce Clark said in a statement. "However, the relatively robust security package being afforded to the term loan and the revolving credit facility hurts the position of unsecured creditors."