Rand Merchant Bank on Monday unveiled its latest securitisation of auto loans and leases for BMW Financial Services — a R1,4-billion issue consisting of nine categories of notes of varying maturities.
Securitisation is the process by which assets on a company’s balance sheet are converted into marketable securities, which are then sold to investors and traded in the capital markets.
The notes, which will be listed on the Bond Exchange of South Africa (Besa) on April 15 this year, target two principal classes of investor.
The first four categories of notes, which have maturities of three, six, nine and 12 months, are targeted at money-market investors, who trade at the short end of the market.
“This is a real boon for money-market investors,” says Tobias Essig, financial director at BMW Financial Services. “It’s the first time that they have access to auto-loan securitisation notes of such short duration.”
The remaining five categories of notes have maturities of 18, 24, 30, 36 and 42 months. These are attractive to long-term investors, such as life assurers and pension funds.
“If past experience is anything to go by, we confidently expect this issue to be over-subscribed,” says Barry Martin, securitisation specialist at Rand Merchant Bank. He points out that the previous four securitisation issues for BMW Financial Services were over-subscribed.
“Moreover, we have eliminated the pre-payment risk that typically characterises an auto-loan securitisation of this kind through a note- specific liquidity facility which provides investors with greater certainty on their repayment profile.”
What makes this issue special, says Essig, is that it has been done through a dedicated investment vehicle called Auto Series Investments, which has been registered with Besa as a domestic medium-term note programme and established to issue up to R6-billion in securitisation notes.
Due to significant growth in all business areas of BMW Financial Services, further issues out of this entity are expected to take place regularly this year and going forward. — I-Net Bridge