The interest that companies pay on asset-backed commercial paper is higher than what top-rated companies pay on unsecured comparable debt, even with start-up expenses of US$20,000 to US$100,000. Still, the cost is lower than other forms of short-term financing, such as bank loans.
The finance arm's commercial paper had already been trading as a tier-two borrower, because it had second-tier ratings from both S&P and Fitch Inc, so its borrowing costs will likely remain the same, traders said. Some investors may take the company off their approved lists if it loses the top rating from Moody's, which will force the company to sell more asset-backed commercial paper.
The automaker earlier this week sold US$5.1 billion of bonds backed with auto loans, most of which were rated "AAA," because it was cheaper than selling unsecured bonds.
It also plans to sell $3 billion in convertible preferred securities to help raise cash.
The "Baa1" long-term ratings of Ford's Hertz Corp. rental car unit are also now on review, Moody's said. S&P also has a negative outlook on Hertz's "BBB" rating.
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