Ford Motor Co. (NYSE: F)’s financing division has cancelled plans for a new sale of debt, in what some consider the first shot across the bow to the bond market since the signing of the financial reform regulation.
The Wall Street Journal, citing bond market participants, reported that Ford Motor Co. (NYSE: F) cut the deal which was packaged by a group of auto loans because it could not make use of credit ratings in its offering documents, which is now a legal requirement for such bond sales.
The new financial reform law makes it easier for investors to sue credit rating agencies for giving bonds an unrealistically high rating. As a result, Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have all decided to no longer let bond issuers list ratings in their public sale documents.
Agencies generally set ratings to help set the prices that investors (often banks, mutual funds or local governments) agree to pay. Securities tied to consumer loans are legally required to give investment ratings in formal offering documents.
Some speculate that the cancellation of the Ford Motor Co. (NYSE: F) deal may be the first of many deals in the asset-backed securities market which have been thwarted by the financial reform regulation which recently worked its way through congress, but the ratings agencies will likely seek a reprieve from the Securities and Exchange Commission or Congress, The Journal reported.
Share of Ford Motor Co. (NYSE: F) traded up 1.86% hitting $3.29 during mid-day trading on Thursday.
