Following the successful reception of the new Motown dealer floorplan conduit and issuance vehicle from Ford Motor Credit, the issuer plans to take the uniquely low liquidity backstop even lower, sources close to the situation confirmed.
The single-seller conduit structure, which offers issuers the ability to fund with only a 5% liquidity backing, is expected to move down to zero - bolstered instead by the offering of paired subordinated ABS offerings, according to issuer and underwriter sources.
One source even speculated that had Ford pushed the issue, the company could have achieved a liquidity backstop of only 3%, but unfamiliarity on the part of the ratings agencies necessitated the 5% level initially, with the plan to lower it down the road.
This is only available to floorplan collateral, though, due to the extremely high payment rates - usually north of 40% and close to 50% - at which dealers repay Ford. Also, unlike most assets, the collateral is not a loan but rather the autos themselves that can be easily repossessed without losing resale value.
This added feature only bolsters the attractiveness of the structure to rival captive auto lenders, to which structural innovator Lehman Brothers has already pitched the idea. While so far most have taken a wait and see approach to setting up a floorplan conduit/note issuance vehicle of their own, it is nearly certain that the idea will spread should Ford see the expected results.
Currently at only $3 billion in size, sources on both sides of the equation expect the program to grow significantly throughout the year.
