Volkswagen Leasing debuts in green

2 min read
Jihye Hwang

Volkswagen Leasing raised €2bn from its debut green bond offering in three tranches on Monday which gained a whopping demand of over €6.9bn at its peak, brushing aside concerns that too much supply from the Volkswagen stable could dent demand.

The €800m March 2026s, €500m March 2029s and €700m September 2031s came with a guarantee from Volkswagen Financial Services (A3/BBB+, Moody's/S&P), the captive finance subsidiary of German automaker Volkswagen. Though priced through a different issuer, VW FS tapped the sterling and Australian dollar markets just last week, while parent Volkswagen is currently marketing a Panda bond that will be issued via Volkswagen International Finance.

Aside from the group borrowers, companies like Traton, in which Volkswagen is the main shareholder, also tapped the market in May but failed to get its books covered on a €500m five-year bond.

The new bond issue from Volkswagen Leasing, however, is not just another VW supply, said a lead. "It's different – it's got the green element," he said.

Despite the ongoing dieselgate scandal that continues to be fought in the courts, some investors have moved on to focus on the company's shift to electric vehicles, with proceeds of the bonds being used to finance and/or refinance eligible green projects relating to vehicles with zero-exhaust emissions, as defined by VW FS group's green finance framework. VW FS held investor calls in early September to promote the framework, which was the company's first.

The green bonds also managed to drum up decent demand after starting initial price thoughts around 35bp–40bp back of the company's conventional bonds. Combined books exceeded €2.5bn, excluding lead interest, just about two hours after IPTs were announced.

Still, most of the pricing was tightened at final terms. The 2.5-year, 5.5-year and eight-year bonds landed at 88bp, 140bp and 163bp, respectively, inside IPTs in the areas of 120bp, 170bp and 195bp, via active bookrunners Deutsche Bank, ING, IMI-Intesa Sanpaolo, SEB and Societe Generale.

Comparables included Volkswagen Leasing's 0.25% January 2026s and 1.5% June 2026s that were bid at 72bp and 80bp, respectively.

Demand was slightly skewed towards the shortest tranche, which was also reflected in the issue size. The 2026s gained final books exceeding €2.5bn. The 2029s and 2031s received respective orders of over €2bn and €1.9bn.

Volkswagen Leasing was the only borrower in the high-grade corporate primary, though the pipeline grew further with both Grenke and Elisa preparing to print single-tranche trades that are coming alongside a concurrent tender offer.

Bankers are expecting a supply of €5bn–€7bn this week.