While some investors have snubbed publicly traded dealer stocks, others are showing interest in car dealer bond issues.
Falcon Financial, a Stamford, Conn., finance company that provides long-term capital loans for dealers, has completed a $115 million bond issue.
The successful bond issue - and the investment-grade ratings it got from debt-rating services - indicates there will continue to be financing available for dealers to expand, said Vernon Schwartz, CEO of Falcon Financial.
The notes that were sold were long-term loans to privately held dealership groups, generally seeking funds to expand.
'Before, if dealers wanted debt capital, there were limited places to go,' Schwartz said. 'Now the public capital markets have opened up.'
Falcon pooled $115 million in long-term capital loans to dealers and sold the notes to the investment community. The sale - known as a securitization - was the first of its kind involving dealer business loans, Schwartz said.
The securitization gives Falcon more funds to make additional loans to dealers. 'We hope to do another pool in May or June,' Schwartz said.
The transaction, which was underwritten by Goldman Sachs & Co., received investment-grade ratings of Aaa to Baa2 by Moody's Investors Service.
Falcon Financial was incorporated in 1997.
'Falcon Financial has value for small dealers who do not have proper banking relationships,' said Sheldon Sandler, founder of Bel Air Partners, a Princeton, N.J., investment firm that serves car dealers. 'It's like a subprime paper for car dealers.'