GM Turns to Private Market for $2 Billion Loan Sale
Goldman Sachs Oversees Deal as Investors Seek High-Quality Debt
Key Takeaways:
- GM Financial sold $2 billion of prime auto loans in a private deal last quarter, an uncommon move for the company, according to people familiar with the matter.
- The sale, managed by Goldman Sachs, highlights growing investor demand for private credit tied to high-quality borrowers as the market expands beyond its $1.7 trillion base.
- GM’s private transaction comes as its public asset-backed securities issuance has slowed this year, signaling a shift in funding strategy amid tighter market conditions.
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General Motors Financial Co. sold $2 billion of auto loans to at least one investor in a private deal last quarter, a rare case of the auto lending giant turning to non-public markets to get financing, according to people familiar with the matter.
The sale was overseen by Goldman Sachs Group Inc. The automaker sold off loans made to prime, or financially stable, borrowers, said the people, who asked not to be identified discussing sensitive information.
Spokespeople for GM Financial and Goldman Sachs declined to comment.
GM sold individual loans at a time when investors have a growing appetite for private debt tied to prime borrowers, snatching up everything from mortgages to installment loans. Money managers have raised billions of dollars to invest in private credit.
High-quality loans could help private credit win a bigger share of a market that could be as big as $40 trillion, according to an from Apollo Global Management Inc., growing beyond the current $1.7 trillion direct lending market that mostly provides riskier loans to lower-quality corporate borrowers.
“Investment-grade private credit is the new topic all investors have been asking us about today,” said Daniel Leiter, the international head of Blackstone Inc.’s credit & insurance unit, in a recentinterviewwith Bloomberg. There was particular interest from insurers, he added.
(Bloomberg Television via YouTube)
GM Financial’s private deal is notable because the car manufacturing and finance giant is one of the best-known borrowers in public bond markets. For example, it’s the 22nd-biggest issuer in the Bloomberg US Corporate high-grade index, out of more than 800. It also routinely sells asset backed securities, with its most recent US offering having come in August, a nearly $1 billion deal tied to prime auto loans.
It’s unusual for major auto lenders like GM to privately sell large pools of loans directly to investors, according to market participants. But selling debt directly can be faster than using public securities, and deals like GM’s can help demonstrate to ratings firms that companies have multiple avenues for raising money, a sign of a stronger and more creditworthy borrower.
GM’s issuance of asset backed securities has waned this year. So far it has sold $5 billion of ABS backed by auto loans, data compiled by Bloomberg shows, after selling at least $8 billion of the bonds annually for each of the last five years. With US holidays in late November and December, there are a dwindling number of days for it to sell more debt. The company’s vehicle for selling bonds backed by subprime auto loans, known as AmeriCredit Automobile Receivables Trust, hasn’t completed any deals so far this year, according to Bloomberg data.
Despite private credit’s rapid growth in recent years, some on Wall Street have been sounding the alarm that the opaque nature of this “shadow” lending market could be hiding underappreciated risks. Jamie Dimon, chief executive officer of JPMorgan Chase & Co.,warnedOct. 14 that private credit vehicles known as business development companies might face bigger losses when there’s an economic slowdown.
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