AMAG Leasing sold the first European covered bond-type instrument backed by auto lease receivables today (Wednesday), and the Swiss company’s triple-A rated CHF260m 3.25 year CPT domestic deal was around twice subscribed while offering it substantial savings versus senior and ABS issuance.

The new issue is the first off a programme of up to CHF1.5bn of AMAG Leasing AG, the financing arm of AMAG Group, which is the sole importer of VW group vehicles in Switzerland, serving private and commercial customers.

The inaugural trade was announced on Friday, with a group investor call on Monday afternoon followed by a webinar on Tuesday explaining the rating analysis of Fitch, which assigned an expected AAA rating with stable outlook. The new issue was launched ahead of the redemption next week of an ABS issued off AMAG’s Swiss Car platform.

Arranger and sole bookrunner Zürcher Kantonalbank (ZKB) opened books this morning for the CHF200m minimum 3.25 year conditional pass-through (CPT) deal, and ultimately sized it at CHF260m (€246m) on the back of an order book just shy of CHF500m. The new issue was priced at a yield of minus 0.02%, equivalent to 41.25bp over SARON (the Swiss Libor replacement).

“We are very pleased with the outcome,” Matthias Ogg, head of special products at ZKB, told The CBR. “We printed at a negative yield and the maximum size the issuer could do.”

Asset managers were allocated 55.6%, insurance companies 9.4%, pension funds 4.6%, banks 17.4%, and bank treasuries 13.0%.

Ogg said the broader investor base and market access covered bonds offer versus ABS – particularly during times like the pandemic – was a key reason for AMAG to launch its new programme.

AMAG has three auto lease ABS outstanding, but the books for such transactions might contain only up to a dozen accounts, given restrictions many Swiss investors are faced with vis-à-vis the asset class, according to Ogg. The auto covered bond was placed with 31 accounts.

In parallel, the auto covered bond structure offered AMAG cost savings, he noted, with the spread of 41.25bp being around 38bp lower than it might achieve on a senior unsecured bond, which in turn has this year been priced almost 40bp inside ABS, despite the latter’s eight notch higher rating. Furthermore, the ongoing cost and resources needed to manage the auto covered bond programme are lower than those required for separate ABS transactions, making more frequent and flexible issuances possible.

“That’s why we thought there was the need to create a product that is investible for a wider universe,” said Ogg. “We looked at the Swiss mortgage covered bond structure, which has now been used by three issuers, and thought that would be a perfect starting point.

“So we based our structure on that, but it just has a different collateral pool consisting of auto leases and not mortgages.”

He said AMAG’s auto covered bond came around 22bp wider than the latest Swiss mortgage covered bond issuance, but noted that this has tended towards the long end of the curve.

In yesterday’s webinar, Cosme de Montpellier, senior director, Fitch Ratings, agreed that AMAG’s issuance is in many respects very similar to Swiss contractual covered bonds it rates, apart from the assets backing the issuance and the CPT structure, noting that the relatively short maturity of the collateral affects both aspects. Fitch also rates AMAG’s Swiss Cars ABS issuance.

“All in all, all the different aspects that we see – the issuance template, the assets, the conditional pass-through feature – are things that we were able to look at in other programmes,” he said, “but the difference here is the combination of everything, which makes this quite unique, especially in terms of the credit quality and the revolving nature of the pool.”

Auto loan receivables have been among collateral used in a spate of covered bond-type transactions in India in the past couple of years, before the Reserve Bank of India in September prohibited the way such deals had been structured.