Last Monday Ford Motor Credit closed the first-ever extendable ABCP program, backed exclusively by revolving wholesale floorplan loans, in tandem with a short-term note issuance vehicle dubbed "Motown", which refers to the issuer's Detroit location. The structure was developed by Lehman Brothers, which is a dealer on the program, acting jointly with Morgan Stanley, and is being actively shopped to other captive auto finance companies, according to several issuers.

Ford's program is similar to the Emerald and Dakota credit card programs from MBNA and Citibank, respectively, in that it allows for the issuer to extend the maturity of its borrowings in order to minimize potential liquidity backstop, sources added. Also, this has been compared to home-equity warehousing facilities Bishop's Gate and Principal Residential Mortgage, both set up by Lehman.

The conduit was structured innovatively, sporting a surprisingly low liquidity requirement. Whereas in standard single-seller conduits, banks must have 100% of funds accessed on hand in the event of a default in repaying the face amount of CP upon maturity, borrowings from this conduit need just 5% of liquidity support, sources close to the deal noted.

This is due to the fact that the structure transfers a significant portion of the liquidity risks from the backstop banks to capital markets investors and that floorplan receivables are much more reliable than consumer receivables. Since these loans are from Ford Credit to local dealers and are secured by the actual vehicles, the likelihood of default on the part of the dealer community to the only source of supply are viewed as slim.

As is the case in most floorplan transactions, Motown has a trigger to wind down the entire conduit should the payment rate, defined as the principal incoming divided by total loan balance, dip below 21%. By contrast payment rate triggers for the Emerald program are approximately 10%.

Monthly payment rates in the sector are higher than for most collateral types, according to Thomas Reese, Director at Fitch. "Floorplan receivables generate steady payment rates, north of 40%, meaning the entire loan balance is usually paid by the third month of the loan, making it fairly unlikely that the payment rate trigger will be hit.

This is actually issued from the same trust as the $5 billion floorplan deal Ford priced last July, which recently earned Lehman a "Deal of the Year" award from Thomson Financial. That offering also used a structure common to the credit card sector for the securitization of wholesale receivables.

While the $3 billion program is not something new to the market - it has been used in the aforementioned credit card conduits - this is the first time it has ever been implemented with this collateral and its use by Ford makes it quite significant. Sources at just about every other captive issuer confirmed that Lehman has pitched this type of vehicle, and some plan to set up a similar program sometime in the future.

Autos to make the push in 2002

Last week Standard & Poor's released the results of an ABCP program administrator survey, predicting that outstandings will grow as much as 13% this year, which would put ABCP at nearly $850 billion.

Interestingly, autos are expected to replace trade receivables as the top asset sold into conduits this year, as the large captive finance companies, such as Ford and others, continue pulling out all the stops for liquidity.

"Over time, trade receivables as a percentage of the overall portfolio have been shrinking, but it remains the largest single sector, so it is an interesting development," said Thomas Fritz of S&P. "It may in fact this year be eclipsed by other assets."

According to S&P's survey, autos will represent 18% of new origination in 2002, trade receivables 17%, equipment leases and loans 16%, and credit card receivables 10%. Through the third quarter of 2001, trade receivables represented 25% of the total ABCP market, credit card receivables 16%, and auto assets 14%.

Separately, S&P in conjunction with GMAC Mortgage will host a conference call on Monday (2/4/02) to discuss GMAC's conduit, Mortgage Interest Networking Trust (MINT).

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