Toyota picking up speed

Toyota Finance Australia (TFA) has had a growing presence in Australian and offshore debt markets in recent years. The company’s Sydney-based treasurer, Carol Lydford, discusses a recently struck alliance which is expected to facilitate an increased debt-funding requirement, including a possible Australian securitisation debut.

Toyota Motor Corporation (Toyota) entered into a strategic partnership with Mazda Corporation (Mazda) in 2017. How has this affected loan origination and business growth in Australia?

The partnership will have a very positive impact on TFA. Following the Toyota and Mazda alliance, in January 2019 TFA and Mazda Australia formed a strategic partnership where TFA would provide Mazda with consumer finance as a white-label product as well as dealer financing.

Since the local alliance, we have been setting up the framework and infrastructure and now have a significant number of Mazda dealers on board. We also executed the first Mazda Finance consumer contract in July. This is organic growth which will ramp up over the next few years and will result in substantial growth to the asset portfolio, and subsequently the debt portfolio, of TFA.

How has TFA’s funding strategy evolved, especially when it comes to diversity of sources?

The key for TFA is to maintain a diversified debt portfolio and ensure we have access to multiple markets. We are committed to the domestic market and we look to issue regularly in Australian dollars.

There can be constraints when issuing into the domestic market regarding achieving our volume aspirations while maintaining competitive pricing. Given the increasing size of our annual funding task, we need to look to offshore markets with deeper liquidity – such as Europe, as we did in April this year.

We also maintain a range of financing products in various markets. We have three very active commercial-paper programmes issuing into Australia, Europe and the US.

We also have bilateral bank loans and securitisation financing. We are looking to expand our securitisation programme in early 2020, including potential public securitisation transactions in the future.

What would be the trigger for TFA to enter the public asset-backed securities market?

For TFA, the benefits of accessing public securitisation as an additional source of funding would be around gaining further diversification of funding sources and diversifying our investor base. We have been asked, on many occasions and by quite a few of our investors, when we will launch a public securitisation transaction. So we are well aware of the significant demand for this source of financing in Australia and offshore.

TFA tends to issue its senior-unsecured deals at tenor that is also ideal for bank-debt funding – in the short-to-mid curve. What are your considerations for balancing bank and public debt funding?

We tend to limit our bank funding to the shorter tenors, in order to maintain competitive pricing. When we look at capital markets, we look to issue into strong markets taking into consideration investor preferences as well as our upcoming maturities and remaining maturity profile.

Our perspective on the domestic market at present is that the 3-5 year tenor range is looking ideal for TFA’s typical issuance. When we went to the euro market in April 2019, we deliberately chose two- and five-year tranches to achieve greater volume while managing our maturity profile and refinancing considerations. This strategy also resulted in more diverse investor participation, as many investors had a preference for either the shorter or longer tenor.

We want our bonds to gain momentum as a primary-market offering and then trade well for investors in the secondary market. So we try to issue where demand is strongest rather than being fixated on a certain tenor.

How does TFA seek to differentiate itself from its auto-lending competitors, in a sector where there is activity from banks, other nonbanks and emerging lenders?

It is a competitive market, which is good for the industry and customers alike. TFA has held itself in good stead over the years through its commitment to support the dealer network and the sale of Toyota vehicles in Australia, even in volatile times such as during the global financial crisis. This also provides our customers with a sense of stability, security and brand familiarity.

When it comes to our products, TFA is highly rated and has access to a variety of competitively priced finance products and markets. This, coupled with our unique value proposition through products such as Toyota Access, allows us to maintain a competitive edge on our main competitors.