Convert the type into vector outlines using Cmd + Shift + O or from the menu use Type -> Create Outlines. Then you can edit the letter shapes as needed. But to actually create a new font from your work, you will need:

Permission from the original typeface owner (some type foundries are actually fairly permissive, others are... not). Legal questions should be directed to a lawyer in your jurisdiction.
Or your own letter shapes that were specifically generated by you and are not derivatives of copyrighted work. Legal questions should be directed to a lawyer in your jurisdiction.
A font editor like FontForge, FontLab or Glyphs to generate a font file in the format desired.

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