J.P. Morgan Will Help General Tire Tap Asset-Backed Securities Market
Goodwin, William, American Banker
General Tire Inc. is tapping the asset-backed securities market for the first time, with the help of J.P. Morgan & Co.
Up to now, Morgan has mainly provided traditional loans to the Akron, Ohio-based company, but the asset-backed securities market is a cheaper source of capital.
"With the assistance and support of J.P. Morgan, we will have the funds and flexibility needed to efficiently finance our operations," John G. Gritman, General Tire's treasurer, said in a statement Wednesday.
General Tire is owned by Continental AG of Germany, the fourth-largest tire maker in the world.
Morgan will issue securities backed by a portfolio of General Tire's accounti receivables.
Special Purpose Corporations
The asset-backed securities will be issued by one of two special purpose corporations formed by Morgan: Delaware Funding Corp., or Delaware Intermediate Term Securitization Corp.
By issuing securities through these conduits, General Tire essentially is able to take advantage of their superior credit ratings.
One of the Morgan conduits sells securities in the form of certificates of deposit, and the other sells medium-term notes.
It wasn't immediately clear which special purpose corporation is being used in the General Tire transaction. …