Toyota Financial holds cash in excess of funding needs

Toyota Financial Services’ funding sources mirror that of its OEM’s product mix, providing “more resilient free cash flow,” according to Fitch Ratings.

In fact, TFS, the nation’s largest auto lender by volume, has access to $27 billion in dedicated funding through committed bank credit facilities of $20.5 billion and an average liquidity portfolio of $6.5 billion, as of Dec. 31, 2019, the captive’s treasury team told Auto Finance News. The banks providing these facilities are contractually committed to make loans to Toyota Motor Credit Corp. in this amount on their request. As of Dec. 31, 2019, these facilities were not drawn.

“For liquidity purposes, we hold cash in excess of our immediate funding needs,” the team stated. “These funds are invested primarily in short-term, highly liquid money market instruments.”

Toyota Motor Co. also has an intercompany lending infrastructure, which allows its captive access to a part of Toyota Motor’s $84 billion of available liquidity, if needed. The OEM’s liquidity portfolio is separate from the $27 billion in liquidity dedicated to TFS.

Further, TFS is one of the most active prime issuers in the asset-backed securities market, with $5.1 billion in public auto ABS issuances as of yearend 2019. On top of that, the captive has a $1.5 billion five-year revolving ABS shelf it issued last year, $9.4 billion in unsecured notes, and $1.8 billion in private ABS, totaling $16.3 billion of funding raised through capital markets.

However, the captive does not include funds raised in the capital markets in its available liquidity, as most of the capital raised was used to refinance debt maturities and new business growth, according to the TFS treasury team.

TFS also has $70 billion worth of readily saleable loans and leases, according to a February 2020 investor relations report. As of yearend 2019, TFS’ outstanding loan and lease portfolio was $94.5 billion, and the captive had $46.2 billion of originations, according to Big Wheel Auto Finance Data.