Standard & Poor's downgrades of General Motors and Ford Motor Co. has sparked some concerns among European investors as to how the rating action is poised to affect existing European securitizations sponsored by the finance subsidiaries of the two companies. The relevant transactions are Ford's Globaldrive deals and GMAC's EMAC and RMAC transactions. According to analysts at Barclay's Capital the rating actions should not impact the deals directly because the early amortization triggers within these transactions require the insolvency of the originator as opposed to only a ratings downgrade.
"As such, downgrades of the originator do not trigger any changes in how the transactions operate," said analysts. "GMAC transactions are serviced by third-party servicers and are based on static pools of collateral. As such, the indirect exposure of the EMAC and RMAC transactions to GM credit deterioration is minimal, in our view."
"The Globaldrive transactions from Ford are serviced by Ford finance subsidiaries in Europe, and since they are revolving transactions, [they] require the finance subsidiaries to generate new collateral. As such, the Globaldrive transactions have a higher degree of sensitivity to Ford credit risk, but we view the degree of this sensitivity as still limited, provided that the collateral continues to exhibit stable performance. "