We are all well aware that at some point GM is going to issue an IPO. It has long been rumored that this could happen in the Fall. With a filing in August, the company would be on track to get the IPO completed sometime in November. Speculation is that the IPO filing will come just after GM offers their Q2 results which are expected to show a profit.
In the meantime, Ford has pulled a bond offering as a result of new regulatory reform. The rating agencies such as Moody's and S&P seem to be fearing legal liability associated with the Dodd-Frank legislation which speaks to accuracy of ratings and holds ratings firms to the same type of standards that auditing companies must adhere to.
Ford was trying to sell of some debt related to auto financing. The auto financing industry has seen a rebound, but credit markets are still tighter than they have been in the past. In particular, those with poor credit are still having difficulties getting financing. Ford, which has its own financing arm, has been able to offer consumers more in way of financing options. The company has benefited. As has been anticipated since this spring, GM is working on a deal of their own to obtain a financing arm.
Even with credit arms of their own, if the companies can not sell their debt off in the form of bond offerings, it could constrain the credit markets for consumers. Without ratings debt becomes harder, if not impossible to sell off. The SEC announced yesterday that it would temporarily allow bond sales to go ahead without credit ratings in bond offering documents, however, it is the ratings that allow potential bond buyers to gauge their risk, and potential bond buyers are limited to buying AAA rated bonds.
It is obvious that something has to give, and that it may take some time for things to shake out.
Catch a video on the subject via Business Insider
Position - No Position Ford, GM