On Wednesday, Ford Motor Credit used a
unique approach to distribute its US$1.34bn ABS backed by prime
auto loans - it cut off the process of price whispers and
invited orders based on the price guidance for different
In a typical ABS, issuers usually sound out investors with a
price whisper for the different tranches in an offering, then
provide price guidance based on demand before finalising levels
at time of pricing.
Ford had used this distribution style with its previous
prime auto-loan backed ABS in November, and by repeating this
method it achieved more efficiency this time around.
"Such a distribution approach works well for an issuer like
Ford because it is a programmatic issuer, and each of its deals
looks very consistent from one to the next in terms of
collateral and structure," said Brian Kane, head of ABS
syndicate at Bank of America Merrill Lynch.
Ford's move last Wednesday was seen as an attempt to
increase transaction transparency, cut down the time taken to
sell these notes to investors, and take the transaction subject
more quickly so investors get better allocation to their orders.
The distribution method enabled Ford to achieve tight
pricing levels - and not over-the-top oversubscriptions -
because investors got allocations that closely matched their
orders. At the end, bankers said the tranches received smaller
orders, but investors ended up with relatively larger
The US$1.342bn deal was led by Bank of America Merrill Lynch
(structuring lead), BNP Paribas and Deutsche Bank as joint
bookrunners. The deal was backed by a loan pool with an average
FICO score of 726 made up 87.45% of new vehicles.
The pool was geographically diverse with approximately seven
months of seasoning, and consisted of 40.86% of retail contracts
with terms more than 60 months.
The deal contained six tranches that included a US$307.1m
Class A1 (rated A1+/F1+) that carried a 0.29-year weighted
average life and priced at the guidance level of 0.2%.
The US$415.3m Class A2s (rated Triple A) with an average
life of 1.05 years had guidance of 6bp-8bp over EDSF and priced
at 6bp. A similar result was seen in the other tranches.
The weighted average spread across the tranches - rated
Triple A down to Triple B - was 17bp, which compared to 22.5bp
on Ford's previous deal in November. In that deal, too, Ford
came up with just guidance for different tranches and not
The Triple A tranches on the latest deal were 1.4 to 2 times
covered, while the subordinated tranches were about 4 to 5 times
"These distribution methods work when the market tone is
strong like [it is] now," said a banker away from the deal.
"Ford can get away with telling the market the pricing it
likes, because it is a well known issuer. Others could try it
but I am not sure how many can achieve the same kind of