Nissan Motor captures minuscule coupons despite litany of risks

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Nissan Motor Acceptance Corp. recently filed a prospectus with the Securities and Exchange Commission to issue $1.3 billion in a mix of fixed- and floating-rate notes, and quickly priced the offering for coupons significantly lower than its $1 billion transaction in late April.

The earlier bond deal came to market two months after financial markets became highly stressed as the pandemic unfolded, and less than a month after the Coronavirus Aid, Relief and Economic Security Act was signed by President Trump. Since then the investment-grade bond market has been on a tear as investors have gobbled up debt from strong issuers likely to benefit from government relief efforts.

Added to the current deal is a $50 million, floating-rate tranche that priced at one-month Libor plus 18 basis points, according to Finsight. Pricing was unavailable on a $254 million short-term debt portion rated A-1+/P1 in the current deal, but the earlier deal’s $162 million short-term tranche with the same rating found a spread of 5 basis points for a coupon of 0.98%

The richest coupon on the current deal’s AAA-rated, fixed-rate portions was 0.71%, compared to the last deal’s lowest coupon of 1.38% among tranches holding the same rating, according to Finsight.

Wells Fargo Securities acted as structuring lead on the April transaction, according to Finsight, and moved to joint lead in the current deal. The additional top-tier banks in the earlier deal were Societe Generale, Lloyds Banking Group and Bank of America.

Mizuho Securities took the helm as structuring agent in the current deal and lead agents also included Mitsubishi UFH Financial Group and Sumitomo Mitsui Banking Corp.

The prospectus for the Nissan Auto Receivables 2020-B Owner Trust deal provides investors with a long list of potential risks, headed by the impact of COVID-19 on automobile sales globally. The prospectus also cites the migration away from the Libor benchmark for floating-rate debt by the end of 2021, the U.K.’s exit from the European Union, and numerous more technical factors.

Particularly relevant as the coronavirus spreads across continental U.S., the prospectus notes the risk stemming from a concentration of NMAC obligors in Texas, Florida and California, three of the states with the steepest infection rates today.

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