Despite declining retail business, resulting in lower levels of managed receivables available to back securitized bonds, Ford Motor Credit Co., the financing unit of Ford Motor Co., plans to issue more ABS backed by auto loans and leases in 2006.
The company aims to generate between $140 billion and $145 billion in managed receivables in 2006, and will increase asset-backed securities to between 49% and 53% of its total funding, said K.R. Kent, the finance unit's chief financial officer, during a presentation to analysts in New York City last week. In 2003, Ford Motor Credit financed about 25% of its $175 billion in managed receivables through securitization. In 2005, its managed receivables slipped to $150 billion, but the securitized portion increased to 38%. Although the proportion of securitization to the company's total funding has increased since 2003, Kent said the company could push those levels even higher. Kent declined, however, to specify what limits the company might put on tapping the ABS market for funding, despite analysts' skepticism about how much of its loans and leases could be reasonably securitized.
"I'm not going to get into where the cutoff is," he said. "I think we have a very good balance sheet, and very good balance [of assets] across that balance sheet."
Kent said his firm hopes to continue earning a 16% getting a return-on-investment, and deflected several analysts' concerns springing from the company's near-junk credit rating. Moody's Investors Service, for instance, rates Ford Motor Credit's unsecured debt at Ba2.'
The company is completely confident in the quality of the underlying loans securing its ABS deals, because it relies on a proprietary credit-scoring model that assesses consumer credit - as it relates to paying off auto loans - more accurately than just using FICO scores, said Kent. The Ford Credit model looks at income stability, uses a larger sample size and focuses solely on automotive loans, among other measures. He was not, however, prepared to take on analysts' concerns about whether the consumers in the scoring model have heavily levered mortgages, or analysts' questions about whether the company would continue to leverage its managed receivables while it carried a below investment-grade rating.
Kent said the company plans to generate between $8 billion and $15 billion in public transactions, and make $25 billion to $35 billion through private deals in 2006. Of the$9 billion in transactions Ford Motor Credit completed this year thru March 15, $6 billion of that was done through private transactions, and $3 billion were public deals.
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