Ratings agencies dropped Ford below investment-grade status in 2005, when its future looked grim. The following year, the company took out $23.5 billion in loans for a major restructuring that has made it healthy again.
Ford cut its debt by $14.5 billion last year, saving it $1 billion in annual interest expenses. Ford's debt stood at $19 billion at the end of 2010.
In its latest action, the company plans to pay cash for all of its outstanding 6.5-percent cumulative convertible trust securities. The securities were issued in 2002 and mature in 2032, although Ford can choose to redeem them at any time.
Ford will pay holders $50.33 per trust security plus some interest on March 15. Alternatively, holders can also choose to convert each security into 2.8 shares of Ford common stock. Holders who choose to convert them to common stock must do so by March 14.
Ford expects to report a $60 million charge in the first quarter as a result of the action. The company said the debt reduction will lower its annual interest payments by $190 million.
Ford shares rose nearly 2 percent to $16.21 in after-hours trading after the announcement was made. The action could dilute Ford's stock depending on how many holders convert their securities to shares.
Ford recently reported a $6.6 billion profit for 2010, its second straight annual profit. However, its fourth-quarter profit fell sharply, hurt by a $960 million charge for debt repayment.