Volkswagen said today that it priced its CNY800 million ($129 million) securitization of Chinese auto loans.
The CNY699 million of class A notes were sold with a fixed interest rate of 4.80% and the CNY44 million of class B notes were sold with a fixed interest rate of 8.08%, according to a company press release.
The deal, called Driver China One, obtained international ratings from both Fitch Ratings and Moody’s Investors Service. The class A notes were assigned ratings of AA’/ Aa3’ and the class B notes were rated A-’/ Baa2’. The notes were also rated 'AAA'/'AAA'/'AA+' and 'A+'/'A+'/'A' respectively by local ratings agencies China Credit Rating Co (CCRC), China ChengXin International Credit Rating (CCXI) and China Lianhe Credit Rating.
Driver China One is the first time a Chinese auto loan securitization secured an international ratings. The international ratings mark another big step for the burgeoning asset class because it opens the door to a wider investor base.
Volkswagen said that investor demand for the notes was strong. The class A notes were oversubscribed by 1.2 times and the Class B notes by 1.5 times at placement-pricing levels.
The notes, due August 2020, are backed by automotive loan receivables originated by Volkswagen Financial (China) Co., a unit of Volkswagen Financial Services AG. China International Capital Corp lead the deal, according to the Moody’s presale report.
"China is an important market for the Volkswagen Group not only in terms of vehicles, but also in the field of financial services," said Frank Fiedler, CFO of Volkswagen Financial Services AG, in the press release. "We have been growing strongly in China during recent years and are now working together with around 1,747 car dealers. Alone in 2013 we increased the number of financing contracts by 52%."
In June BMW priced its first Chinese auto loan securitization, Bavaria Sky China 2014-1. The class A notes, set to mature on Aug. 26, 2015, priced at 4.8%; and the class B notes, set to mature on Jan. 26, 2016, priced at 8.09%.
In May Ford priced what was the first foreign owned auto finance company to close a securitization of Chinese auto loans. The deal, Fuyuan 2014-1, offered two tranches that were priced via a Dutch auction, according to a document posted on Ford Motor Credit’s website. A CNY680 million tranche with an expected maturity of November 2015 was priced at par for a coupon rate of 5.5%. A CNY72 million tranche with an expected maturity of May 2015 was priced at par for a coupon rate of 9%.
The transactions are part of the ABS pilot program that grants the wholly foreign-owned auto finance companies access to the local ABS market for the first time under the supervision of the China Banking Regulatory Commission and the People’s Bank of China.
China is the largest sales market for the Volkswagen Group with around 3.3 million motor vehicles sold in 2013.