By SIMONA COVEL Dow Jones Newswires
© 2006 The Associated Press
PHILADELPHIA Bonds issued by Ford Motor Credit
Co., the financing arm of troubled Ford Motor
Co., surged Monday as investors digested a
weekend news report saying the auto maker may try
to sell its profitable credit arm.
In afternoon trade, Ford Motor Credit's 9.875
percent notes due 2011 were up more than 10
points, or cents on the dollar, at 105.50 cents
on the dollar, according to MarketAxess, an
electronic trading platform for corporate bonds.
Ford Motor's 6.625 percent notes due 2028 were up
more than two cents at 74.75 cents on the dollar.
The cost of protecting the Ford Motor Credit
bonds against default, meanwhile, dropped sharply
in early trade. The five-year credit default
swaps for the finance unit tightened 0.20
percentage point. That means it costs investors
$20,000 less to insure $10 million of Ford bonds against default.
Citing sources familiar with the situation, The
Detroit News reported Saturday that Ford is
considering the sale of its finance arm, and that
was one of the factors that precipitated the
resignation of Robert Rubin. The former Treasury
secretary is leaving Ford's board of directors
because of a professed potential conflict of
interest with Citigroup Inc., where he is a director.
In the bond market, where Ford and Ford Motor
Credit securities are issued separately, market
participants have been calling for a sale for
months, as junk credit ratings have dramatically
raised Ford Motor Credit's cost of funding and eroded its earnings.
"For them to be competitive long term, Ford Motor
Credit should look to sell a partial or full
stake," said Craig Hutson, analyst at GimmeCredit
in Chicago. With parent Ford's auto business
ailing and bleeding red ink, "the only way
they're going to (achieve higher credit ratings)
is if they sell a partial stake."
A Ford Motor Credit spokeswoman said that the
company's stance has not changed. "Ford Motor
Credit is a strategic asset for Ford,"
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