DEARBORN, Mich., Nov 19 (Reuters) - The finance arm of Ford Motor Co. announced plans on Tuesday to sell $3 billion worth of car loan contracts to Bear, Stearns and Co. in a deal that will help fund the automaker's core business while lowering its credit risk.
Ford Motor Credit Co. will continue to service the retail automobile installment sale contracts for a fee, the company said in a statement.
But unlike the structuring of an "asset-backed securities" deal, the "whole loan" sale announced on Tuesday means that Ford Credit will retain no direct interest in the contracts and none of the liability.
"We are pleased to have developed this further source of liquidity, which complements the sources of capital already available to Ford Credit," Malcolm Macdonald, Ford's treasurer, said in the statement.
"This transaction is similiar to the transactions that have been standard practice in the home mortgage market for years," he added.
Raising expectations for additional "whole loan" sales going forward, the statement said Ford Credit and its financing affiliates intend to sell off car loans on a recurring basis to banks, insurance companies and other sophisticated purchasers.
"These purchasers may choose to retain the contracts on their own balance sheet, sell them to other whole loan purchasers or repackage them for sale in the capital markets," the company statement said.
Ford and its finance arm are the largest U.S. sellers of corporate debt, with some $63 billion bonds outstanding.