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Benjamin · 28-10-2008, 15:56

28.10.2008
Moody's cuts Ford Motor Credit's ratings

Moody's Investors Service downgraded the senior unsecured rating of Ford Motor Credit LLC ('Ford Credit') to B2 from B1 and placed the rating on review for further possible downgrade. The rating action reflects the downgrade of Ford Credit's parent, Ford Motor Company, and pressures on Ford Credit's own stand-alone credit profile. Moody's said that Ford Credit's ownership by and business concentrations with Ford expose it to Ford's operating challenges and links its ratings. Consumer demand shifts away from large vehicles have undermined the value of a large percentage of collateral backing Ford Credit's consumer receivables. Additionally, the decline in Ford's sales of trucks and SUV's has weakened the financial health of the dealers Ford Credit finances. These factors amplify negative delinquency, loan default, and lease residual realization trends that normally accompany cyclical economic weakness. Given the potential for a protracted economic downturn, Moody's believes Ford Credit's loan provisioning and depreciation costs are likely to be elevated in coming quarters, pressuring the firm's finance margins.

Ford Credit is also contending with constraints to its financial flexibility that Moody's expects will impact the firm's profitability and operations. Ford Credit entered the third quarter with a solid cash position and adequate third-party liquidity commitments to fund its new business. However, recent credit market turmoil could make more difficult the firm's efforts to maintain a confident liquidity stance; as time progresses, new funding sources and
capabilities could become more challenging to identify and execute. Ford Credit is expected to benefit from access to the Fed's commercial paper funding facility as backstop for its FCAR asset-backed commercial paper program.

However, the company will likely utilize cash balances and further shrink its asset base to provide the cash necessary to meet upcoming debt maturities, thus limiting financial flexibility. Additionally, Moody's anticipates that Ford Credit's higher costs of funding will, in addition to higher credit costs, contribute to margin erosion in future periods.

Positively, Ford Credit has remained committed to a prudent leverage posture in the current environment. Ford Credit suspended its dividend to its parent as support for its liquidity and capital positions. Moody's expects that the percentage decline in Ford Credit's asset and debt balances over the
intermediate term will outpace any diminution of the firm's equity base.

Moody's notes, however, that Ford Credit's increased use of secured forms of financing is leading to structural subordination of unsecured creditors, as the level and quality of asset coverage of unsecured debt declines. The one-notch difference between the Ford Credit and Ford ratings reflects Moody's view that
lenders to Ford Credit would likely experience lower loss severity in default than would the creditors of Ford.
[...]

28-10-2008, 15:56	#8
Benjamin TBB Family Registriert seit: Mar 2004 Beiträge: 10.374	28.10.2008 Moody's cuts Ford Motor Credit's ratings Moody's Investors Service downgraded the senior unsecured rating of Ford Motor Credit LLC ('Ford Credit') to B2 from B1 and placed the rating on review for further possible downgrade. The rating action reflects the downgrade of Ford Credit's parent, Ford Motor Company, and pressures on Ford Credit's own stand-alone credit profile. Moody's said that Ford Credit's ownership by and business concentrations with Ford expose it to Ford's operating challenges and links its ratings. Consumer demand shifts away from large vehicles have undermined the value of a large percentage of collateral backing Ford Credit's consumer receivables. Additionally, the decline in Ford's sales of trucks and SUV's has weakened the financial health of the dealers Ford Credit finances. These factors amplify negative delinquency, loan default, and lease residual realization trends that normally accompany cyclical economic weakness. Given the potential for a protracted economic downturn, Moody's believes Ford Credit's loan provisioning and depreciation costs are likely to be elevated in coming quarters, pressuring the firm's finance margins. Ford Credit is also contending with constraints to its financial flexibility that Moody's expects will impact the firm's profitability and operations. Ford Credit entered the third quarter with a solid cash position and adequate third-party liquidity commitments to fund its new business. However, recent credit market turmoil could make more difficult the firm's efforts to maintain a confident liquidity stance; as time progresses, new funding sources and capabilities could become more challenging to identify and execute. Ford Credit is expected to benefit from access to the Fed's commercial paper funding facility as backstop for its FCAR asset-backed commercial paper program. However, the company will likely utilize cash balances and further shrink its asset base to provide the cash necessary to meet upcoming debt maturities, thus limiting financial flexibility. Additionally, Moody's anticipates that Ford Credit's higher costs of funding will, in addition to higher credit costs, contribute to margin erosion in future periods. Positively, Ford Credit has remained committed to a prudent leverage posture in the current environment. Ford Credit suspended its dividend to its parent as support for its liquidity and capital positions. Moody's expects that the percentage decline in Ford Credit's asset and debt balances over the intermediate term will outpace any diminution of the firm's equity base. Moody's notes, however, that Ford Credit's increased use of secured forms of financing is leading to structural subordination of unsecured creditors, as the level and quality of asset coverage of unsecured debt declines. The one-notch difference between the Ford Credit and Ford ratings reflects Moody's view that lenders to Ford Credit would likely experience lower loss severity in default than would the creditors of Ford. [...]