Wheels keep turning

Toyota Finance Australia (TFA) has expanded its funding and lending presence in recent years – and continues to do so despite the impact of COVID-19 on the auto industry. Carol Lydford, TFA’s Sydney-based treasurer, discusses funding plans including the potential for a public, green-labelled securitisation.

TFA’s term funding so far in 2020 includes a euro senior bond deal priced in April. How has COVID-19 affected funding plans and outlook?

TFA made several strategic funding decisions in response to COVID-19, to shore up readily available liquidity to manage through the disruption in capital markets.

These include bringing forward and increasing the target volume of our euro transaction, which was always in our plans to refinance upcoming redemptions. The pricing and volume we achieved in this transaction demonstrate strength of support from our investors despite turbulent market conditions.

The euro transaction provided necessary liquidity, not only to fund normal business operations but also for TFA to provide much needed support to our finance customers, fleet customers and dealers – some of which continue to be negatively affected by COVID-19.

Second, we reduced our operational funding reliance on CP markets, where we are frequent issuers in Australia, the US and Europe. These markets were disrupted to varying degrees, which affected the reliability of rolling over existing funding.

We remain committed to our strategy of maintaining a strong presence in domestic and offshore capital markets. We will certainly be looking to take advantage of Australian market conditions, which have been supported by the lack of supply from major banks and strong investor demand. We have a specific near-term focus to issue frequently into the Australian dollar bond market.

Does bringing a public asset-backed securities deal to market still have a place in TFA’s future funding plan? What else can you say about what a potential deal might look like?

Yes, our plan remains to incorporate an expanded securitisation capability into our funding mix. We are progressing well with our system-capability upgrades to continue our journey of public asset-backed issuance, including the potential for ESG [environmental, social and governance] format. Our focus is on the domestic market in the near term and many of our existing investors are eager to see a TFA public securitisation deal.

How have you managed investor relations during the COVID-19 crisis?

The investor-engagement strategy we have applied in recent years has really paid off during COVID-19. We recognise the need to develop and maintain open and informative communications with our investors and stakeholders. Over the past few years we have been engaging in regular investor meetings domestically as well as in Europe and Asia – where we are also very active. We also maintain company information on our investor-relations website.

This enables our investors to stay up to date with our strategy, operations and financial performance. It is critically important to maintain frequent dialogue and connection. This helps immensely when an issuer is looking for investor participation in its bond issuance, not only in times of strong liquidity but also when markets are stressed.

We are also very fortunate to be part of a globally recognised and respected brand, with strong capital-markets capabilities and performance. We launched and priced a very successful transaction in Europe in April, at the beginning of the COVID-19 crisis. Investor participation in this deal was particularly pleasing, not only with repeat investors but a significant proportion of investors that placed orders and were subsequently allocated bonds who were new to the TFA name.

TFA’s lending was on a fairly strong upward trajectory prior to the crisis. What has been the approach to origination since the pandemic hit?

TFA continues to expand its lending platforms and seek growth opportunities. COVID-19 has had an impact on the auto industry globally, including here in Australia, but our operating business model has not changed and is resilient. TFA has always maintained a disciplined approach to lending including best-in-class automated credit-decision tools, and dedicated credit and lending teams.

How is the auto-loan space performing during the crisis?

It is too early to tell at this stage as government support has provided much-needed financial support to many Australians. We did, however, witness a significant increase in the number of calls to our contact centre as customers sought to clarify their options – including whether formal hardship arrangements were available to them.

TFA continues to work with its consumer, commercial and fleet customers, as well as the dealers that play an important role in the auto industry in Australia, and is offering support packages where necessary.