Ford Motor Credit Co.'s (FMCC) pushed ahead with its ABS deal dubbed Ford Credit Auto Owner Trust 2010-B. This was after hitting a glitch after the rating agencies withdrew their ratings because of the repeal of Section 436(G) of the Securities Act of 1933 after President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The latest Ford offering -- which was upsized to $1.387 billion from $1.08 billion -- priced at levels tighter than initial price guidance, according to published reports.
Bank of America Merill Lynch, BNP Paribas, Credit Agricole Securities and Deutsche Bank Securities served as lead managers.
Co-managers on the previously postponed transaction are Goldman Sachs, HSBC Securities, Scotia Capital, and Wells Fargo Securities.
The deal had earlier been postponed as a result of the uncertainty created over Standard & Poor's, Moody's Investors Service, Fitch Ratings and DBRS withdrawing their ratings from publication in securitization deals' public offering documents as a result of Section 436(G) 's repeal.This repeal opened the rating agencies to potential liability under Section 11 of the said Act.
But , the Securities and Exchange Commission has since calmed the market by offering a no-action letter granting a six-month reprieve wherein ratings will not be required in the public ABS offering documents. This has offered issuers like Ford a reprieve and it will likely keep ABS issuance from grinding to a halt until a more permanent solution is reached.
According to a presale report by Fitch Ratings, this deal is the second public retail offering issued by FMCC in 2010. The rating agency recently rated 2010-A and 2009-C while it did not rate 2009-D or 2009-E. Fitch said that Ford's transaction is backed by a pool of new and used automobile, light-truck and utility vehicle loans bought by FMCC from dealers and serviced by FMCC. The notes in this deal are all fixed-rate.
The class A-1 notes are money market eligible, according to Fitch. The class A-2 through class D notes will be publicly offered.
The uncertainty created by the Dodd-Frank bill is likely to impact volumes in the ABS space and more issuers are expected to opt out of public market issuance and take the private market route instead.
However, JPMorgan Securities analysts said that despite having a viable funding alternative, the 144-A market has limits that will curtail issuance volume potential.
"The investor base is not as deep as with SEC-registered bonds and some investors are prohibited from purchasing 144A and the amount allocated to 144A investment is smaller than for public ABS," JPMorgan analysts explained . "Pension investors, in particular, generally prefer publicly registered deals. While we believe there is sufficient demand to clear new 144A issues, there are typically some concessions given, benchmark issuers minimal, if any, and weaker names perhaps 10 basis points wider than with publicly registered transactions (all else equal)."