Santander Consumer Boost IPO Target to $1.88 Billion

Santander Consumer USA Holdings Inc., the U.S. auto-lending unit of the Spanish bank, increased the maximum amount it’s seeking to raise in its initial public offering today to $1.88 billion.

Santander Consumer and shareholders including KKR & Co. and Banco Santander SA are offering 75 million shares for $24 to $25 each, according to a filing today. The Dallas-based company and shareholders initially offered 65.2 million shares for $22 to $24 apiece. The stock will start trading tomorrow, listed on the New York Stock Exchange under the symbol SC.

Consumer finance companies are tapping public markets amid rising demand for the higher yielding loans they offer. Santander Consumer, which specializes in subprime auto loans, is also positioned to cash in on a surge in auto sales as less credit-worthy borrowers return to the car market, said Robert Dodd, an analyst with Raymond James & Associates Inc.

“There’s been a rebound in the market” for subprime auto-loans, said Dodd, before the company increased the size of the IPO. “Valuations reflect the optimism.”

U.S. auto sales rose for a fourth straight year in 2013, to 15.6 million cars and light trucks. That’s the most since 2007 and 50 percent more than in 2009, according to researcher Autodata Corp. Analysts surveyed by Bloomberg project vehicle sales topping 16 million this year.

Springleaf, JGWPT

The company, which initially planned to price its IPO tomorrow, moved the offering up by a day because it was several times oversubscribed, according to a person with knowledge of the matter who asked not to be named because the information is private.

Springleaf Holdings Inc., a consumer finance company, which raised $411 million in October is up about 49 percent since its debut through yesterday. JGWPT Holdings Inc., which offers cash for settlements under the J.G. Wentworth brand, has gained about 24 percent since its November debut.

Founded in 1995, Santander Consumer originates auto loans through car dealerships, manufacturers, banks and its direct-to-consumers website Roadloans.com. Subprime loans, which have both higher yields and increased default rates, make up more than 80 percent of Santander Consumer’s loans.

The company plans to expand its portfolio of prime loans through partnerships with auto-makers such as Chrysler, according to the IPO filing. Santander Consumer recently paid Chrysler Group LLC $150 million to be the preferred provider of the automaker’s loans over the next 10 years under the brand Chrysler Capital.

KKR, Warburg

Banco Santander will own 61 percent of the unit after the sale, regulatory filings show. A company backed by KKR, Warburg Pincus LLC and Centerbridge Capital Partners LLC will own about 7 percent, before the overallotment option is exercised. The funds acquired a 25 percent stake in 2011, when Banco Santander was offloading assets to bolster its finances.

At an IPO price of $24.50 a share, the buyout funds would post a partly realized gain of at least 138 percent on their $1 billion equity investment, the IPO filings show. That includes about $257 million in cash dividends garnered since the 2011 investment.

Citigroup Inc. and JPMorgan Chase & Co. are managing the offering.

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