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Ford needs niftier vehicles

Ford has $40 billion in total back-up facilities, with room to do another $5 billion in the unsecured commercial paper market and about $7 billion extra capacity in external ABS conduits. So it can increase short-term debt if need be.

None of these credit facilities has ratings triggers that would make access punitive and analysts believe Ford could do all its term financing in ABS for the next two years if necessary. And as Paul Griffith, credit analyst at Goldman Sachs, points out, relying on the ABS market is not necessarily problematic. "The aircraft industry finances itself through equipment financing so it's conceivable that the auto industry could transition to a similar model of near complete reliance on the ABS markets."

That will be fine as long as there is not some shock to the ABS market when Ford Credit and GMAC are still effectively locked out of the unsecured debt markets. If that occurred, the only solution would be gradually to run down receivables to pay off debts. At least investors can take comfort from the fact that Ford Credit says there is a ten-billion dollar cushion between its receivables and debt maturing over next 12 months, which means that even in the very worst situation, it would be self-liquidating.


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