Navistar to Sell $919 Million of Bonds Backed by Loans on Trucks, Buses

Navistar International Corp. plans to sell $919 million of bonds backed by loans on trucks, buses and trailers, according to a person familiar with the offering.

Companies are issuing asset-backed securities tied to consumer and business loans even as the European sovereign debt crisis roils markets. Nissan Motor Corp. and Banco Santander SA sold $1.75 billion of bonds backed by consumer debt today, according to people familiar with the offerings, who declined to be identified because terms are private.

“The market has been generally receptive to asset-backed deals,” said Chris Sullivan, who oversees $1.6 billion as chief investment officer at United Nations Federal Credit Union in New York. “There is a lot of credit protection built into the Navistar deal. This kind of instrument is attractive in an environment of uncertainty in credit markets.”

Also the asset-backed debt now being marketed is of relatively short maturity, giving some investors additional comfort, Sullivan said. With a shorter-term bond, a buyer is less affected by changes in interest rates and credit risk.

Nissan sold $750 million of debt backed by auto leases, and the largest top-rated portion, maturing in about 1.64 years, yields 40 basis points more than the benchmark swap rate, the people said. Banco Santander sold $1 billion of bonds backed by auto loans through a finance arm, and a top-rated portion that matures in about one year will price to yield 60 basis points more than the benchmark swap rate.

Sale Timing

Credit Suisse Group AG, Deutsche Bank AG, JPMorgan Chase & Co. and Royal Bank of Canada are underwriting Navistar’s debt sale, the person familiar with the transaction said. The securities will be issued this week through the Warrenville, Illinois-based company’s financial unit, according to the person.

A call to Navistar wasn’t immediately returned.

The company’s profit fell 93 percent to $17 million during the first quarter, or 23 cents a share, from $234 million, or $3.27, a year earlier, it said on March 10. Revenue slid 5.4 percent to $2.81 billion as falling demand for commercial trucks in the U.S. battered the company as the recession deepened.

On Jan. 27, Navistar sold asset-backed securities tied to payments on inventory loans through a Federal Reserve program to jumpstart lending. The Fed’s Term Asset-Backed Securities Loan Facility expired in March.

About $44 billion in bonds backed by auto loans, credit card payments and other debt have been issued this year, compared with $53.3 billion in the year-ago period, according to data compiled by Bloomberg.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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