Volkswagen's TALF Eligible Deal Increased To $1.75 Billion -Source
May 05 2009 - 9:30AM
Dow Jones News
Volkswagen AG's (VLKAY) auto loan backed bond, eligible for
funding under a Federal Reserve program, has been increased in size
to $1.75 billion, a person familiar with the matter said
Tuesday.
The deal has launched and is scheduled to be sold later Tuesday,
the deadline for loan applications for the Fed's Term Asset-Backed
Securities Loan Facility, or TALF.
Led by JPMorgan Chase & Co. (JPM) and Banc of America
Securities, the Volkswagen deal was originally $1 billion in size.
Its largest triple-A rated tranche worth $489 million, has launched
at 185 basis points over a short-term futures benchmark.
On Monday, JP Morgan sold its $5 billion credit card loan backed
deal at 155 basis points over one month London interbank offered
rate or Libor. This was the largest TALF eligible bond so far.
Another issuer, CNH Global NV (CNH), the agricultural and
construction equipment unit of Fiat, increased the size of its
offering to $1 billion on Monday from an original $780.6 million.
It will be sold later Tuesday.
The increases in size of the bonds are a sign that investors
have finally warmed up to the Fed's consumer lending program.
Eligible new issuance now stands at over $10 billion, ahead
Tuesday's loan application deadline.
This is a notable increase over issuance seen in the first two
months of the TALF, when investor wariness kept many on the
sidelines.
General Electric Co.'s (GE) $1 billion credit card backed deal,
Honda Motor Co.'s (HMC) $1.25 billion bond and motorcycle company
Harley Davidson Inc.'s (HOG) $500 million deal are also to be sold
on Tuesday.
TALF is aimed at jump starting consumer lending.
Investors apply for loans to finance bonds backed by credit
cards, student loans, and other consumer loans once a month.
Issuers have clustered bond sales around the loan application
deadline, which is the first Tuesday of the month.
TALF-eligible issuance stood at $8.2 billion in March and just
$2.57 billion in April.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com