• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Ford Motor to Sell $5.3 Billion of Auto Loan Bonds

Joined
6/5/07
Messages
348
Points
26
Ford Motor to Sell $5.3 Billion of Auto Loan Bonds (Update1)

By Sarah Mulholland

May 15 (Bloomberg) -- Ford Motor Co.'s finance unit plans to sell $5.3 billion of auto-loan bonds, the automaker's biggest sale in more than six years, as investor demand returns for asset-backed securities.

The sale would be Dearborn, Michigan-based Ford's third in the asset-backed market this year and the largest since the company sold $5.9 billion of debt in 2002. The sale was confirmed by Brenda Hines, vice president of global communications of Ford Motor Credit.

The Ford deal shows that a freeze in the asset-backed securities market may be thawing after the collapse of subprime mortgages spawned $342.4 billion in writedowns and credit losses at financial firms worldwide. Demand helped drive $12 billion of sales of bonds backed by auto loans by Ford, GMAC LLC, Chrysler LLC in the two weeks through May 8. Nelnet Inc. today paid the lowest relative yields this year on $1.35 billion of bonds backed by student loans.

Yields on bonds backed by assets such as auto and credit card debt fell relative to benchmark rates after the Federal Reserve said earlier this month it would accept AAA rated asset- backed bonds as collateral for Treasury loans.

The yield on 3-year AAA rated auto-loan debt narrowed 15 basis points to 160 basis points more than the benchmark rate in the four weeks through May 8, according to Citigroup Inc. analysts. A basis point is 0.01 percentage point.

`Renewed Interest'

Government-guaranteed student-loan debt spreads narrowed about 5 basis points to 95 basis points last week, according to JPMorgan Chase & Co. High-yield bonds had the busiest week for new issues since November last week.

``There appears to be more renewed investor interest,'' said Gary Santo, a managing director of consumer asset-backed securities at Fitch Ratings in New York. ``Investors seem to be differentiating risk across assets, which can only be a good thing for government-guaranteed collateral.''

Nelnet, the Lincoln, Nebraska-based student-loan provider, issued three-year bonds rated AAA that priced to yield 70 basis points more than the three-month month London interbank offered, or Libor, said a person familiar with today's sale, who declined to be identified because the terms aren't public. That's a narrower spread than the 105 basis points Nelnet was charged last month, and the 100 basis points the company offered on March 31.

Three-month Libor is 2.72 percent.

Asset-backed securities are bonds backed by receivables such as payments on mortgages, student loans, auto and credit-card debt. A basis point is 0.01 percentage point.
The Ford sale is being managed by Citigroup, Merrill Lynch & Co., BNP Paribas, Lehman Brothers Holdings Inc., Morgan Stanley and Royal Bank of Scotland.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

Last Updated: May 15, 2008 18:41 EDT
 
Back
Top