Toyota Australia looks offshore to meet increased funding task

Toyota Finance Australia (Toyota Australia) priced its largest-ever euro deal on 1 April. The issuer says an increased funding task since entering into a global partnership with Mazda Motor Corporation is leading it to lean more on offshore markets and is also seeing it consider public issuance in alternative asset classes.

Toyota Australia’s €1.15 billion (US$1.3 billion) deal was split between two tranches and led by Barclays, BNP Paribas, Citi, HSBC and Societe Generale. As has been the case in other recent euro transactions from Australian corporates, a well-subscribed orderbook supported significant price revisions in both tranches (see table).

Toyota Finance Australia deal details

Tenor (no. of years)Indicative volume (€m)Indicative price guidance (bp/mid-swap)Final volume (€m)Final pricing (bp/mid-swap)
2 500 30 area 650 13
5 500 (no grow) 50 area 500 23

Source: BNP Paribas 2 April 2019

The final pricing represented a single digit new-issue concession to the borrower’s curve, according to Toyota Australia’s Sydney-based treasurer, Carol Lydford. She adds that the two-year tranche has the lowest yield of the year so far across the euro corporate market. At guidance, the order book reached approximately €4.5 billion across both tranches, having peaked at more than €5 billion.

Preceding the deal, Toyota Australia, along with Toyota Motor Finance (Netherlands) and Toyota Motor Credit Corporation undertook an extensive roadshow in the UK and Europe, specifically to provide investors with an update on the performance and operations of the entities and Toyota group. Lydford reveals there was a strong conversion rate of these investors that participated in the transaction.

Increased task

The deal is Toyota Australia’s third offshore transaction in the last 12 months, having priced a €500 million five-year deal in April 2018 and a £250 million (US$326.7 million) four-year deal in July 2018.

Toyota Australia also had its largest year of wholesale funding in the Australian domestic market in 2018, pricing nearly A$1.2 billion (US$850.9 million) compared with A$825 million in 2017 and A$150 million in 2016.

Lydford says Toyota Australia’s increased call on capital markets has been a result of continued growth in the underlying business and expects further growth following the announcement in January 2019 that Australian Alliance Automotive Finance, a wholly owned subsidiary of Toyota Australia, has entered into a strategic alliance with Mazda Australia to provide financial services to Mazda dealers and customers.

The parent companies of Toyota Australia and Mazda Australia entered into a long-term partnership in 2017.

“Toyota Australia’s funding task continues to grow steadily, and we are active in monitoring the Australian dollar market, which is part of our core issuance strategy, for opportunities. We also continue to monitor the euro market, US dollar Reg S market and are a frequent issuer of Uridashi bonds into Japan,” says Lydford.

Lydford also reveals that with the task increasing, Toyota Australia may look to public securitisation as part of its funding strategy. The issuer currently has active private trusts and is putting infrastructure in place to enable the expansion of the securitisation programme, including through the issuance of public transactions.