HG bonds: Toyota Motor Credit adds to automotive issuance; terms

Toyota Motor Credit Corp. today completed a $3 billion, four-part offering across 2024, 2026 and 2031 notes.

Of note, Toyota is the third automotive company to tap the U.S. bond market in the new year. On Jan. 5, the financing arms of General Motors and Korea-based Hyundai completed multi-tranche transactions. General Motors Financial placed a $2.5 billion, two-part offering, while Hyundai Capital America printed $2.7 billion over three tranches.

Toyota Motor Credit, a frequent issuer, completed six bond placements last year. It completed various deals during the pandemic era, at ever-declining rates. Most recently, in October 2020, it placed a $2.75 billion, three-part offering across floating-rate notes due Oct. 14, 2022, at 34 basis points over the secured overnight financing rate, or Sofr, and 0.35% same-dated fixed-rate notes at T+25, or 0.395%, along with 0.80% five-year fixed-rate notes due Oct. 16, 2025, at T+53, or 0.834%.

Those costs were far below where the company netted rates last March, at the onset of the global pandemic. That month, the company placed a $4 billion offering of senior notes in three parts across 2.9% three-year notes due March 30, 2023, at T+260; 3% five-year notes due April 1, 2025, at T+265; and 3.375% 10-year notes due April 1, 2030, at T+265.

The Torrance, Calif.-based issuer is a subsidiary of Toyota Financial Services Americas Corp. and ultimately Toyota Motor Corp., and provides financing to authorized Toyota and Lexus dealers.

S&P Global Ratings and Moody's maintain negative outlooks on their respective corporate ratings.

Following a one-notch downgrade for parent Toyota Motor in May (to A+), S&P Global Ratings kept its outlook at negative, citing expectations that "the adverse effects of the COVID-19 pandemic could linger through fiscal 2021 and beyond, delaying a recovery in Toyota's profitability and increasing pressure on its creditworthiness."

Moody's in March cut its rating for the Toyota financing arm to A1, from Aa3, and in May revised the outlook to negative.

However, in December, Fitch affirmed its A+ rating for Toyota Motor Credit and revised the outlook to stable, from negative, following the same action on the parent company. "TMCC's asset quality remains strong, with credit metrics improving in recent years. While retail auto credit performance has been better than Fitch initially anticipated at the outset of the pandemic, auto credit losses are expected to weaken in 2021, as some of the distortions that have been supportive of strong consumer credit performance over the past six months moderate," Fitch said Dec. 4, 2020.

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