Ford Credit's Wild E-Ride
Bergsman, Steve, Chief Executive (U.S.)
Ford Motor Credit Co., the $20 billion finance subsidiary of Ford Motor Co., surprised the business world-and in some regards, itself-early in the new year, when it successfully concluded the first ever corporate debt offering on the Internet.
If any company was prepared for the world of e-commerce finance, it was Ford Credit. As an early adopter of electronic issuance in its capital markets strategy starting with commercial paper, the company was no stranger to bringing financial processes to the Internet world.
"This E-Bond, as we like to call it, was an exciting achievement for many reasons," Donald A. Winkler, chairman and CEO of Ford Credit, says of the $1.2 billion transaction. "It was fully consistent with our overall approach of using new technologies when and where it makes sense for our customers. In this case, we were the first corporation to embrace new technology in this way, and it helped us become more agile and nimble. If you think we can't top it, just stay tuned."
The real surprise was how deeply democratic the distribution process became once the Internet was involved. The original bond offering was to be for $1 billion, but there was sufficient demand to push the issuance higher.
Even so, 87 percent of all the orders were for $5 million or less. As Bill Cohen, managing director of debt capital markets for Lehman Brothers, the lead manager, notes, "for a Ford transaction that is extraordinary. The average ticket size is normally two to three times higher."
That meant Ford reached more players with the offering than ever before. "We got twice the number of investors," says Cohen. "Maybe even more than that when you include Fidelity." Fidelity Capital Markets, a division of National Financial Service Corp. (which distributed 325-plus separate orders among its client base), also managed the distribution.
All this underscored Ford Credit's strategy to utilize e-commerce to develop closer links with customers and investors. "We wanted to make sure investors had access to our long term debt via the Internet," says James Bosscher, Ford Credit's assistant treasurer, who was in charge of the operation. "E-commerce allows better access to retail customers and smaller institutional customers. It also allows us to use the Internet to make our products, both automotive and financing, more accessible."
The Internet allows a company like Ford Credit to highlight things not normally accented in a bond transaction. For example, Ford had separate investor presentations, direct linkage to the product Web sites of Ford Credit and Ford Motor, research data from Lehman, Moody's, and S&P write-ups, and even trading history. …