Toyota Motor Corp., a leader in the production of hybrid gas-electric vehicles, is prepping what may be the first "green" auto loan securitization.
The deal, Toyota Auto Receivables 2014-A Owner Trust, is backed by a conventional mix of auto loans. It will issue $1.25 billion of notes, a large portion of which will be retained by the Japanese automaker's finance arm, according to a regulatory filing.
However, proceeds from the deal will be ringfenced for "installment sale contracts and beneficial interests in lease contracts financing new Toyota and Lexus gas-electric hybrid or alternative fuel powertrain vehicles," the filing states.
Citigroup, Bank of America Merrill Lynch and Morgan Stanley are joint bookrunners.
Hybrid vehicles still account for a relatively small portion of U.S. sales of Toyota, Scion and Lexus brands; just 16,000 were sold in February, according to information posted on the automaker's website. By comparison, total sales for the month were 159,284. (That was a decline of 4.3% on the year; Toyota reported that it was largely attributable to a reduction in fleet sales.)
So while there may not be a lot of "green" car loans and leases to securitize, Toyota appears to be hoping that it can attract green investors by committing to use proceeds to finance future purchases of hybrid vehicles.
Proceeds from the offering will be placed into one or more segregated accounts and use of proceeds will be subject to audits by an independent accounting firm, according to the prospectus. Toyota can withdraw from the accounts solely to finance the purchase of the following models: Avalon Hybrid, Camry Hybrid, Prius, Prius c, Prius Plug-in, Prius v and RAV4 EV; Lexus CT 200h and Lexus ES 300h.
Toyota will retain all of a $385 million tranche of Class A-1 notes and a $31.25 million tranche of Class B notes. It will also retain approximately 10% of each of the $400 million Class A-2 notes, the $343 million of Class A-3 notes and the $177.75 million of Class A-4 notes.
Credit enhancement for the notes consists of a reserve account, overcollateralization, a yield supplement overcollateralization amount, excess interest on the receivables and, in the case of the Class A Notes, subordination of the Class B Notes.