Ford Motor Credit Co., the finance arm of the auto giant, is apparently seeking to borrow as much as it can in the bond market.

Like a gas-guzzling SUV, the issuer has been raising the tally of its latest bond offering, which is set to price Thursday morning, ratcheting up the size of the offer with each new positive assessment of investor demand.

And with the offering now tipping the scales at around $7.8 billion, the deal is already the largest by a U.S. firm so far this year.

This is a sharp increase over the $5 billion forecast when news of the offering, via Deutsche Bank, Goldman Sachs and Morgan Stanley Dean Witter, came out last week.

This is the third major bond offering to emanate from the auto sector so far in 2001, including $3.75 billion from General Motors and $7.1 billion from DaimlerChrysler.

But unlike the preceding sales, in which the issuers kept some sort of lid on the borrowing and demand outpaced supply several times over, FMCC, taking apparent advantage of the chance to look in a very wide spread between its borrowing costs and auto loan yields, is apparently tapping the market for all it can get.

“It’s not that Ford is seeing that much more demand than DaimlerChrysler, it’s just that they’re that much more willing to upsize the deal,” says a trading source close to both offerings.

The deal, as of midday Jan. 24, consists of $2.5 billion of five-year notes at 203 basis points over the five-year Treasury, or an estimated 6.98 percent; $2 billion of 10-year notes at 218 basis points over Treasuries; and 3.5 billion euros (about $3.3 billion) of three-year notes to price at 86 to 88 basis points over interest-rate swaps.

The spreads on the issues are lower than forecast last week. In addition, the deal compares favorably to DaimlerChrysler, which had been forced to pay out 250 basis points over Treasuries on its five-year tranche and 274 over the 10-year.

Ford is also paying out a much lower yield than DaimlerChrysler, which priced its five- year tranche to yield 7.323 percent.

Reports emanating from underwriters Deutsche Bank, J.P. Morgan Chase and Salomon Smith Barney indicated that the dollar segments of the DaimlerChrysler deal were about four times oversubscribed, while there were about twice as many euros and pounds chasing the other tranches as there were bonds available.

Interestingly, the explosion in auto bond issuance comes at a time when investors have been treated to increasing doses of bad news concerning the auto industry.

Word of the Ford deal leaked out last week just after the auto company released figures showing that fourth quarter profits fell 32 percent because of declining sales.

And, as recently as Jan. 10, DaimlerChrysler reported that its industrial net cash reserves ran out in the fourth quarter of 2000.

In addition to the general rally in corporate debt that has come in the wake of the Fed’s Jan. 3 surprise 50-basis point rate cut, observers cite the worldwide, multi-currency distribution of the auto offerings as major reasons for their success.

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