Volkswagen plans 1 bn euro ABS sale

LONDON: Volkswagen Financial Services, part of carmaker Volkswagen, plans to sell a two-part security backed by German auto loans, an official at one of the banks managing the sale said on Wednesday.

The larger triple-A rated 936 mn euro ($1.35 bn) chunk of the security, named Driver Six, will be eligible in the repo market, the official said. This means that the borrower keeps securities on its balance sheet and can use them as collateral to obtain liquidity from the European Central Bank.

The European Central Bank has been propping up the asset-backed securities market as demand has dried up in the credit crisis. The ECB Governing Council will meet on Thursday, and is expected to discuss whether to tighten the rules for the liquidity facility.

This is Volkswagen's second auto ABS deal this year, following the sale of Driver Five in January. BNP Paribas and SEB are managing the deal, which also includes a 31 bn euro tranche, rated A+ by both Standard & Poor's and Fitch Ratings, and A1 by Moody's Investors Service.