Originally, the bond was set at $1.25 billion, but Justin Leach, manager of public relations for Toyota Financial Services (TFS), told AutoblogGreen that demand was high and it was quickly oversubscribed. TFS has been looking at more ways to diversify its portfolio after a Diversity & Inclusion Bond that was announced in early 2013 and, with the new Green Bond, TFS is offering something for the “number of investors out there who are looking for investment opportunities in green.”
The way the money from the bond is used, basically, is that TFS takes the $1.75 billion and uses it to finance the purchase or lease of the nine vehicles listed above. As of right now, all the eligible vehicles are plug-in or hybrids, but the rules simply say that the cars in the program have to meet certain “powertrain, fuel efficiency and emissions” criteria. That means:
- Minimum EPA estimated MPG (or MPG equivalent for alternative fuel vehicles) of 35 city / 35 highway
- California Low-Emission Vehicle II (LEV II) certification of super ultra-low emission vehicles (SULEVs) or higher, which would include partial zero emissions vehicles (PZEVs) and zero emissions vehicles (ZEVs).
TFS raises plenty of billions in other ways for the rest of the lineup, and got into asset backed securities in 2010, Leach said. Given the success of this first Green Bond, Leach said he expects TFS to keep this idea in its arsenal. “This one was so well received, I would be surprised if we didn’t see it again,” he said. “If anyone was going to do it, it should be Toyota, right?”
Bond Proceeds to Fund Consumer Loans and Leases for Toyota’s Leading Portfolio of Green Vehicles
TORRANCE, Calif., (March 24, 2014) – Toyota Financial Services (TFS) issued the auto industry’s first-ever Asset-Backed Green Bond in the amount of $1.75 billion. The offering was upsized from $1.25 billion to accommodate demand as institutional investors demonstrated strong interest in this inaugural clean transportation investment opportunity. The Green Bond is the newest component of TFS’ broad-ranging funding program and serves to enhance Toyota’s already extensive green commitment.
Proceeds of the TFS Green Bond will be used to fund new retail finance contracts and lease contracts for Toyota and Lexus vehicles that meet specific criteria, including powertrain, fuel efficiency and emissions. There are currently nine vehicles in the Toyota and Lexus portfolio of green vehicles that qualify.
“Investors have enthusiastically welcomed the industry’s first Green Bond from Toyota Financial Services as a sign of our company’s commitment to environmentally friendly transportation,” said Mike Groff, TFS CEO. “The Green Bond itself represents the innovation that TFS brings to the financial marketplace in creating asset-backed investments that reflect the values of our company. This, in turn, enables us to provide Toyota customers with attractive financing options for their vehicles.”
To develop the Green Bond, TFS worked closely with Citi, which has a long-standing relationship with TFS and shares its commitment to green innovation. Citi served as the structuring lead manager of the bond, and BofA Merrill Lynch and Morgan Stanley acted as joint-lead managers.
The TFS Green Bond is the first of its kind in the auto industry and enhances Toyota’s leadership reputation for green innovation. Toyota currently offers hybrid editions in nearly all of its vehicle categories. At the end of 2013, Toyota’s global sales of hybrids reached more than 6 million vehicles. The latest million-unit milestone was achieved in the fastest time yet for Toyota, taking just nine months.
Since the launch of the first Prius in 1997, Toyota’s hybrid vehicles have resulted in approximately 41 million fewer tons of CO2 emissions1 than would have been emitted by gas-powered vehicles of similar size and driving performance.
Tyler Dickson, Global Head of Capital Markets Origination at Citi, said, “We see excellent investment opportunities for the growing interest among investors and consumers alike in environmentally friendly, energy efficient, clean transportation. The marketplace is eager for these investments and Citi is proud to work with Toyota to issue innovative deals like the TFS Green Bond.”
TFS will commit to use the proceeds of the Green Bond toward the purchase of retail finance contracts and lease contracts for Toyota and Lexus vehicles that meet high green standards as established by three criteria:
Gas-electric hybrid or alternative fuel powertrain
Minimum EPA estimated MPG (or MPG equivalent for alternative fuel vehicles) of 35 city / 35 highway
California Low-Emission Vehicle II (LEV II) certification of super ultra-low emission vehicles (SULEVs) or higher, which would include partial zero emissions vehicles (PZEVs) and zero emissions vehicles (ZEVs)
Qualifying models from Toyota include: Prius, Prius c, Prius v, Prius Plug-in, Camry Hybrid, Avalon Hybrid, and RAV4 EV. From Lexus, qualifying vehicles are CT 200h and ES 300h.
For more information on TFS’ Capital Markets programs, please visit www.toyotafinancial.com. For more information about Toyota’s commitment to the environment, please visit http://www.toyota.com/about/environmentreport2013.
1 As of December 31, 2013, calculated by: number of registered vehicles × distance traveled × fuel efficiency (actual fuel efficiency in each country of sale) × CO conversion factor.
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About Toyota Financial Services
TFS is the finance and insurance brand for Toyota in the United States, offering retail auto financing and leasing, as well as commercial equipment, truck, and fleet financing, through Toyota Motor Credit Corporation (TMCC) and Toyota Lease Trust. TFS also offers extended service contracts through Toyota Motor Insurance Services (TMIS). Lexus Financial Services is the brand for financial products for Lexus dealers and customers. TFS currently employs approximately 3,200 associates nationwide, and has assets totaling over $95 billion. It is part of a worldwide network of comprehensive financial services offered by Toyota Financial Services Corporation, a wholly-owned subsidiary of Toyota Motor Corporation. We announce material financial information using the investor relations section of our website (www.toyotafinancial.com) and SEC filings. We use these channels, press releases, and social media to communicate about our company, our services and other issues. While not all information we post on social media is of a material nature, some information could be material. Therefore, we encourage those interested in our company to review our posts on Twitter at www.twitter.com/toyotafinancial. For more information, please visit www.toyotafinancial.com.
