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Ford Motor Credit leads $8.0 bln of auto ABS supply
By Nancy Leinfuss
NEW YORK, Nov 16 (Reuters) - Ford Motor Credit Co. will lead the roughly $8.0 billion in new auto securitizations sold in the asset-backed securities market this week, hoping to attract investors while using a less costly financing tool.
Ford Motor Co. unit Ford Motor Credit plans to issue a $3.0 billion ABS offering secured by auto and truck loans in the sector's biggest sale this week. Barclays Capital, Bear Stearns and Morgan Stanley are the deal's lead underwriters.
As Ford's credit ratings have slid deeper into junk status, the cost of funding has become more expensive in the unsecured debt market. As a result, Ford has turned to the secured market where financing is less expensive due to the collateral backing the transactions.
Market participants said with other deals from United States Auto Association (USAA) and Nissan Motor encountering some difficulty when determining the right clearing levels for pricing, Ford may be forced to add a little spread concession to sweeten their deal, as well.
"This week's deals by Nissan Auto and USAA had trouble getting done. This (Ford deal) is a similar collateral type so I would expect it may take a little more spread to get it done," said Mike Kagawa, portfolio manager at Payden & Rygel in Los Angeles.
Another market participant said the volume of auto supply this week may push some issuers to offer an extra concession.
"Eight billion dollars in deals in one week is a lot for this sector," said one ABS trader. "Ford's guidance is consistent with where one would expect the paper to come in light of where USAA's deal came this week," the trader said.
Fitch rated Ford Motor Credit's upcoming A1 money market notes "F1+" and its A2-A4 classes "AAA." Its class B issue is rated "A" while its class C and D tranches are rated "BBB+" and "BB+" respectively, Fitch said.
Standard & Poor's assigned preliminary ratings ranging from "A-1+" for class A-1 notes to "BB+" for class D notes.
Fitch's top ratings were based on the high quality of the collateral backing the deal, credit enhancement levels, the yield supplement overcollateralization and the availability of excess spread to pay notes.
Fitch also said its concerns included the competitive U.S. vehicle sales environment, the percentage of loans with terms greater than 60 months -- which would potentially raise the deal's exposure to greater loss severity -- and its recent corporate downgrade of both Ford Motor Credit and its parent.
Fitch Ratings lowered Ford Credit's senior unsecured rating to "BB-minus" from "BB" in August with a negative outlook.
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