Late last week Porsche announced they had successfully issued ABS (Asset Backed Securities) bonds worth nearly $600 million in the US market. This private placement, completed by Porsche Financial Services, Inc., showcases the credit worthiness of Porsche’s receivables (i.e. credit they provide to those customers that don’t make their purchase with cash). As a testament to the strength of Porsche’s assets (and their ability to make good on the notes from sources other than the underlying pool of loans), the coupon/bond was issued at a rate of just over 1 percent.
While Porsche’s release doesn’t discuss specifically how these funds will be used, it’s usually a safe bet to say they’ll be reinvested as working capital and help pay for ongoing operating expenses. As this is a site about Porsche (and not a financial one) we won’t go into depth trying to explain the ins and outs of how these transactions work (for a deeper explanation on ABS transactions check out this article). What’s interesting, and what makes it newsworthy, is how successful the transaction was given it’s only the second such offering Porsche has placed in the US.
“With both these transactions, Porsche has established itself as the benchmark for ABS bonds. Companies often require a number of years and several transactions to win the investors’ trust and achieve this success. Porsche has managed this with its very first two private placements,” said Lutz Meschke, Porsche AG’s Chief Financial Officer. “The strong investor demand again resulted in the bond being significantly oversubscribed, notwithstanding other major car manufacturer transactions being in the market at the same time,” Meschke added.
It’s safe to say we’ll see more of these transactions in the future as Porsche continues to work on their aggressive expansion plans.