TOYOTA FINANCE AUSTRALIA took advantage of deep European demand for decent returns from high-quality corporate names to raise a chunky €1.75bn (US$1.9bn) from a three-part Eurobond last Tuesday.
A regular issuer in much smaller size locally, Toyota Australia was able in one transaction to secure funding for the rest of the year and beyond, even if market conditions remain challenging.
“Toyota Australia has issued euro-denominated bonds twice before and is well known to European investors, but even we were surprised by the scale of interest and orders,” said a banker on the deal.“This stunning trade, following on from Transurban’s €600m 10-year Eurobond on April 3, shows Europe to be a compelling destination for well-regarded Australian corporates at a time when the domestic corporate market still appears closed.
” The €750m 1.584% two-year, €500m 2.004% 4.5-year and €500m 2.28% 7.5-year notes priced 185bp, 220bp and 235bp over mid-swaps, well below 225bp area, 245bp area and 285bp area initial guidance, having attracted a combined €8.2bn-plus final book.
Demand was skewed towards the October 2027s – in line with evident investor desire for duration since global central banks stepped up efforts to support credit markets last month – but Toyota favoured the April 2022 tranche.“A lot of companies want short-dated funding.
They want liquidity but don’t want to pay for, say, a 10-year,” another lead manager said.“The pricing is so much cheaper [for investors] than before and there’s a concession on top as well.” Almost a year ago to the day, Toyota Australia priced two and five-year deals at 13bp and 23bp over swaps respectively.
The two-year came with a negative yield.For its latest trade, the company started with a concession of 65bp–85bp, which was inside the starting premium for Daimler’s trade the previous week.The auto industry is one of the more vulnerable to an economic downturn and was already under pressure before the coronavirus pandemic.
Toyota Australia, rated A1/AA– (Moody’s/S&P), is not eligible for the European Central Bank’s bond buying programme, so relatively big concessions were necessary.The deal suffered no adverse effects from headlines that Toyota Australia is recalling more than 45,000 cars because of fuel pump issues, according to leads Barclays, BNP Paribas, Citigroup, Credit Agricole CIB and Societe Generale.
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