BMW Steers First Auto ABS Offering


Bayerische Motoren Werke AG (BMW) came to market last week for the first time with a well received $1.1 billion auto loan-backed deal that sources said is expected to usher more deals from the German luxury car maker going forward.

"I'd expect them to be a regular issuer," said a banker close to the transaction, who predicted that BMW's future deals might be similar in volume and structure to the one that priced last week. "Just in general, you get more economics, and it's a better deal, if you're doing stuff right around a billion."

Last week's transaction, managed by Salomon Smith Barney and co-managed by Chase Securities and Credit Suisse First Boston, was structured in five parts, with the one-year $400 million A-2 class achieving a spread of 26 basis points over 12-month EDSF, and the two-year, $300 million A-3 class selling for 80 basis points over the comparable Treasury note - two points tighter than original talk.

"We were convinced the market would receive our paper very strongly and it was confirmed," said Norbert Mayer, president of BMW U.S. Capital Corp., a wholly owned subsidiary of BMW AG.

What really drove the deal, one banker said, was the BMW name, which he described as having a lot of "sex appeal." Additionally, BMW borrowers are typically from a high credit-quality demographic. "The collateral is exemplary," the source explained. "Anyone that buys auto paper would want to have this in their portfolio. People have been buying GMAC, Ford, Chrysler on a continual basis. This is a new name they can kind of add into that to diversify."

BMW of North America was formed in 1975, according to an official at the company. Both BMW U.S. Capital Corp, BMW's financial arm, and the loan processing division, BMW Financial Services, were established in 1993.