VW plans China securitization drive as car sales soar
MADRID -- Volkswagen AG plans to sell asset-backed securities in China when government rules allow issuance of the debt amid soaring vehicle sales in the country.
"We are getting ready, it's an internal project at the moment," said Stefan Rolf, head of securitization at Volkswagen Financial Services AG, the carmaker's financing unit.
The Wolfsburg-based company may be ready to issue car loan-backed bonds in China by the end of 2012, if government legislation is ready, he said. Asset securitization is favored by People's Bank of China officials including Deputy Governor Liu Shiyu, who say it can help banks manage balance sheets and will ensure China's markets keep pace with its economic development.
Volkswagen is planning the securities as its vehicle sales in China jumped 20 percent in the first quarter, outpacing industry growth of 8.1 percent, Europe's largest carmaker said in April.
Banks create asset-backed securities by pooling loans into notes that are sold to investors, allowing lenders to raise capital more cheaply than by issuing unsecured debt.
Sales of the bonds in Europe evaporated in 2008 when losses from subprime mortgage bonds in the U.S. caused investors to shun hard-to-value assets. Offerings have picked up since 2009. China hasn't set rules for asset-backed debt, though some of the country's lenders arrange private transactions known as informal securitizations to reduce the loans on their balance sheets, according to Fitch Ratings.
Volkswagen is also working on securitizations in Australia and France that may be ready within the next two years, Rolf said. He also plans to issue local currency deals in Brazil and Japan.
"Our business is growing on the auto side quite significantly, which comes alongside growth in financial services," Rolf said in a June 14 interview on the sidelines of the Global ABS 2011 conference in Brussels.
Volkswagen Finance originated five asset-backed bonds this year in Europe, including the first public sale of securities pooling Spanish car loans since 2007, according to data compiled by Bloomberg. Securitization makes up about 13 percent of VW's outstanding funding and "is going to increase a little further," Rolf said.
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