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Ford Motor Credit Company

FMCC is the captive finance unit of Ford Motor Company, the #2 North American light vehicle producer and #6 globally. FMCC provides retail and dealer financing with 77% of receivables in the Americas segment, 37% in the European segment, and 28% in Asia Pacific. FMCC owns FCE bank for funding activities in Europe. FCE Bank is a UK-based and FCA-regulated bank with subsidiary operations in 14 countries. FMCC has an agreement with FCE to maintain a net worth minimum of $500 mn (no payments were made under that agreement from 2001 to 2015). Auto captive finance companies historically had much weaker "support" agreements (including in some cases no explicit support agreement) than those in place at other manufacturing captives (e.g. strong agreements at Caterpillar, Deere, PACCAR). FMCC offers bondholders a limited "Relationship Agreement" which requires a capital contribution if "managed leverage" (as defined) exceeds a metric of 11.5 to 1 for Debt/Equity. Managed leverage is computed and disclosed each quarter and stood at 8.0:1 as of 4Q17, well inside the limit set by the Relationship Agreement. (17 Apr 2018)

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IG Note: 06 Aug 2018, 10:33 AM ET - Ford Motor Credit is in the market this morning with 3Y fixed and floating rate notes as well as a 7Y fixed offering. We are now market perform at the parent level, but remain constructive on the fundamental strength of FMCC.

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