Volkswagen Sells $1.25 Billion of Bonds Backed by Auto Loans

Volkswagen AG sold $1.25 billion in bonds backed by auto loans in its largest sale in 10 months, according to a person familiar with the sale.

The offering was increased in size from $1 billion, said the person, who declined to be identified because terms aren’t public. A top-rated slice maturing in 2.4 years yields 22 basis points more than the benchmark swap rate. A basis point is 0.01 percentage point.

The Wolfsburg, Germany-based automaker sold $1.5 billion of similar asset-backed bonds in March, according to data compiled by Bloomberg. A portion carrying top grades with a 2.2 year maturity priced to yield 25 basis points over the benchmark, the data show.

Ford Motor Co. (F), through its finance arm, today sold $1.6 billion of bonds backed by auto loans, a person familiar with that sale said. The issue was increased from $1 billion. A top- ranked slice maturing in 2.3 years yields 23 basis points more than the benchmark swap rate.

Bond offerings linked to automobile loans and leases are set to dominate sales of asset-backed debt for a fourth straight year in 2012 as a strengthening U.S. economy spurs consumers to buy vehicles. Sales of the securities may jump 11 percent to $63 billion this year, accounting for about 55 percent of bonds tied to consumer borrowing, according to Wells Fargo Securities LLC estimates. About $57 billion of bonds tied to auto debt were sold in 2011, or 54 percent of new deals, the bank said.

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

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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