MIAMI — Ford Motor Credit Co. is likely to ramp up its asset-backed securitization volume if S&P Global and Fitch Ratings downgrade the captive like Moody’s Investors Service did on Sept. 9, analysts told Auto Finance News at ABS East.
“If Ford were downgraded to non-investment speculative-grade status by S&P Global and Fitch Ratings as well, the [captive] will have to increase its ABS volume to make up for the downgrade,” said Jamie Feehely, managing director of securitizations at National Bank Financial, noting that increasing ABS volume will keep investors optimistic.
In fact, Ford Credit issued two floorplan securitizations following the downgrade, funneling a total of $2.04 billion to the auto ABS pipeline, according to Sept. 20 presale reports by Moody’s.
However, dealer floorplan securitizations are the “most vulnerable to manufacturer rating downgrades because the health of the deal is closely tied to the dealer,” said Amy Martin, senior director of structured finance at S&P Global. The rating agency would have to drop Ford’s rating two notches for the OEM to reach non-investment grade status, Martin said. Currently, S&P has Ford rated at triple-B with a negative outlook.
Investment firm Wilmington Trust concurred, noting that Ford’s downgrade will result in the OEM coming back to the ABS market with a higher amount of financing, said Managing Director of ABS Rick D’Emilia. “Ford used to be the No. 1 issuer in the ABS market — bar none — and they need to come back to this sector,” he said. “[Ford] will probably become a bigger issuer in the ABS market after this downgrade.”
As for other OEMs and captives on the radar for potential downgrades, National Bank Financial’s Feehley “speculates” that General Motors could be next as a result of the recent strikes from United Auto Workers union, he said. S&P Global has General Motors rated at triple-B with a stable outlook.
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