Toyota Financial Services (TFS) is a consumer lender, an auto company and a large borrower, so it faced a triple curse when credit seized up in a market panic that left investors deeply suspicious of all three categories. At the same time, its parent, Toyota Corp., was struggling along with other automakers to sustain sales as funding for auto lending dried up."Without the normal supply of bank credit, Toyota vehicle sales in North America and Europe depended on TFS' ability to step in and fill the void left by the banks," notes Wei Shi, vice president and head of treasury and finance. "To support sales, we needed to find sources of additional funds at reasonable costs during the worst credit crisis of the past 80 years." So TFS went to battle. Getting money depended on access to a diverse but wary investor base that had to have confidence in the issuer's creditworthiness. Investors were losing that confidence in banks, so the auto finance captive, based in Torrance, Calif., had to differentiate itself from banks. It launched an investor education initiative to build awareness that its books contained no toxic assets or hidden losses. Everything hinged on confidence. Investors were rushing away from risk, but there was a flight to quality that could reward issuers perceived as safe havens. As a direct issuer of commercial paper and medium-term notes, Toyota has strong relationships with investors. Those investors were quicker than banks to see why TFS should not be viewed as a bank. "When we tried to convince our bankers to treat us differently, they were skeptical," Shi says. "When we showed them that our paper continued to trade at pre-crisis levels, they were amazed. They just didn't see how we could do it." TFS continued to enjoy access to finicky credit markets at attractive rates well into the fall.
From the November 2009 issue of Treasury & Risk magazine