Wall Street analysts are beginning to quantify the extent to which the recent downgrade of General Motors and Ford Motor Co. to below investment-grade by Standard & Poor's will spur the automakers to increase their secured funding. Bear Stearns equity and debt analysts told investors on a conference call last week they expect GM and Ford to borrow an additional $30 billion through structured bond sales backed by auto loans, which would boost auto-related bond issuance to a whopping 20% of all asset-backed sales (versus 9.3% of last year's sales, according to Deutsche Bank figures). Bear Stearns doesn't think this will have a negative affect on spreads if demand remains the same.
Meanwhile, Credit Suisse First Boston researchers agree and say they expect the automakers to reverse last year's decline in ABS volumes--and to increasingly rely on the bid for whole loans. Conduit sales are also likely to increase, CSFB wrote in a recent report.
Separately, GM said in a Securities and Exchange filing last week it is seeking ways to separate its rating from that of its captive financing arm, General Motors Acceptance Corp.