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By Richard Lindsay
LONDON, July 23 (Reuters) - Italian automaker Fiat launched an 824 million euro bond on Tuesday backed by its customers' car loan repayments, the lead managing banks said. The deal was launched via special purpose vehicle European Auto Securitisation 2002, and is secured on car loan repayments by Spanish and French customers.
Although secured bonds have emerged as a favoured safe haven for cash in recent years -- because they are repaid by ring-fenced assets and therefore protected from corporate misfortunes -- this deal has suffered from prevailing nervousness about the prospects for Fiat and the corporate sector as a whole.
Initially, the triple-A rated tranche was expected to yield around 15 basis points over Euribor but it finally priced at 20 basis points over. Traders said that Fiat's problems with shrinking markets and its large debt load compounded investor nervousness about buying into European companies at present -- anxiety caused by falling profits, shrinking markets and the prospect of accounting scandals spreading from the U.S.
But a source close to the deal said that, although the banks selling the bonds had had to work harder than they would have done a year ago, the deal still found a receptive audience.
"It took longer for accounts (investors) to make decisions that it would have done even three months ago," the source said. "But the widening from initial talk helped concentrate a few minds though I won't deny we lost some guys we would have expected to be in the deal."
The bond's Class B tranche priced at the wide end of expectations at 50 basis points over Euribor.
Fiat's existing secured bonds have underperformed similar deals from other European car makers in recent months.
"It is simply the case that firms like Peugeot and Volkswagen are doing well and look to have a solid future," said a secured bond trader in London. "But no one knows what sort of entity Fiat will be in 12 months time and no market enjoys that kind of uncertainty."
Fiat's latest transaction was managed by JPMorgan, HSBC and Banca IMI and is structured as follows:
-- 704.5 million euros of Class A notes, rated AAA, 1.4
year average lifespan and priced to yield 20 basis points
over Euribor.
-- 45.3 million euros of Class B notes, rated A, 3.5 year
average lifespan and priced to yield 50 basis points over
the Euribor.
-- 74.16 million euros of unrated Class M notes, further
details of which were not disclosed. The Class M notes
will be retained by the issuer.