Ford selling $1B of bonds backed by auto loans

Ford Motor Co. is marketing $1 billion of bonds backed by auto loans after vehicle sales last year reached a four-year high, according to a person familiar with the deal.

The offering, issued through the automaker's finance arm, may be sold as soon as this week, said the person, who declined to be identified because terms aren't set. The company last sold similar debt in July, according to data compiled by Bloomberg.

Ford is issuing asset-backed securities as car sales climb and rating companies raise their outlook on the automaker's unsecured debt. Ford's U.S. sales exceeded 2 million in 2011 for the first year since 2007 amid signs that growth in the world's largest economy is gaining momentum.

Standard & Poor's lifted Ford Motor Co. and Ford Motor Credit's debt grade on Oct. 21 to BB+, one step below investment grade, and Moody's Investors Service raised its rating to an equivalent Ba1 on Oct. 27.

Ford sold $1.39 billion of bonds backed by auto loans on July 19, Bloomberg data show. The top-rated slice maturing in two years priced to yield 19 basis points more than the benchmark interest rate.

Bond offerings linked to automobile loans and leases are set to dominate sales of asset-backed debt for a fourth straight year in 2012 as a strengthening U.S. economy spurs consumers to buy vehicles. Sales of the securities may jump 11 percent to $63 billion next year, accounting for about 55 percent of bonds tied to consumer borrowing, according to Wells Fargo Securities LLC estimates. About $57 billion of bonds tied to auto debt were sold in 2011, or 54 percent of new deals, the bank said.

Top-ranked securities backed by auto loans are yielding 81 basis points more than Treasuries, according to a Bank of America Merrill Lynch index. The spread has narrowed from 94 basis points on Dec. 31, the data show. A basis point is 0.01 percentage point.