Ford Motor Credit Co. was selling a billion-dollar bond backed by auto loans Monday, just days after urging resolution of a regulatory dispute that had threatened to close the $700 billion asset-backed securities market.
The financial arm of Ford Motor Co., which had postponed issuing a deal last week because of uncertainty over the financial regulatory overhaul, offered to sell a $1.082 billion bond, according to a person familiar with the matter.
A Ford Motor Credit spokeswoman said the company had worked directly with the Securities and Exchange Commission to craft a reprieve to a part of the law that makes rating agencies legally liable for their opinions about the risks associated with individual securities and their issuers.
"Ford Motor Credit Co. worked with the SEC to find an approach that temporarily resolves this industry issue," Ford Motor Credit spokeswoman Margaret Mellott wrote in an email to Dow Jones. "Clearly, the SEC recognizes the importance of the public ABS markets, and we are glad the staff is taking temporary measures to ensure public markets continue to be available by establishing a transitional period through Jan. 24, 2011."
The SEC declined to comment. The SEC's staff agreed late Thursday to suspend a rule requiring that deal documents for asset-backed bonds include credit agencies' ratings of the bonds.
Agencies have forbidden clients to include their ratings in such documents, contending that new regulations exposed them to unknown added liability if the issuer defaulted.
The new law regards bond-rating firms as "experts" and holds them liable for the quality of their ratings; previously, the firms have said the ratings were opinions protected by the First Amendment.
The SEC has said it will allow bond sales to go ahead without credit ratings in bond offering documents for the next six months, a move that ends a stalemate between ratings agencies and issuers.
The SEC has agreed to "provide a no-action letter for Ford Credit and other registered ABS issuers," the spokeswoman wrote.
This means Ford Credit and other registered ABS issuers will be able to tap the public ABS markets during the next six months while policymakers and rating agencies work to resolve this issue.
With the reprieve in effect, Ford offered a $1.082 billion bond backed by auto loans Monday. The prime auto loan-backed bond is jointly led by Bank of America Merrill Lynch, BNP Paribas SA, Credit Agricole SA and Deutsche Bank Securities.
Ford's deal has seven tranches and is being rated by Moody's Investor's Service and Fitch Ratings. Dan Curry, president of the bond rater DBRS Inc., said it was "not obvious" what a permanent solution could be.
DBRS, along with Moody's, Standard & Poor's and Fitch, had said they would not give written consent for their names to be used in bond registration statements, out of concern that they would be exposed to new liability created by the financial reform law.
