Russia plans auto loan-backed bond as car sales surge

VTB Group's retail arm is considering the country's first sale of bonds backed by auto loans since 2006 after June car sales increased 45 percent.

VTB-24 of Moscow is likely to offer securities tied to vehicle debt next year as a way of providing credit for car buyers, Alexei Tokarev, head of the bank's auto loan unit, said in an interview in Moscow. ZAO Toyota Bank, the Russian lending unit of the world's largest auto manufacturer, also may issue the notes in the future, President Alexander Koloshenko said.

Prime Minister Vladimir Putin is deploying 11 billion rubles ($360 million) of the government's economic stimulus package this year to revive Russia's car market from a slump the Moscow-based Association of European Business says sent car sales plunging 49 percent last year. Russia surpassed Germany in the first half of 2008 as Europe's biggest auto market, before the global credit crisis and the ruble's 35 percent tumble between August and January 2009 choked demand.

"The car loan market is experiencing a kind of resurrection," said Martin Jahn, managing director of Wolfsburg, Germany-based Volkswagen AG's sales operations in Moscow. "The auto loan market was the engine of the Russian car market growth up to the year 2008."

Russians bought 1.65 million cars in the first half of 2008, a 41 percent increase from the same period a year earlier, according to data from PricewaterhouseCoopers LLP. Sales totaled 174,838 in June, an increase of 45 percent from the year before, according to a report this month from the Association of European Business in the Russian Federation in Moscow.

Auto Loans

The last Russian securities backed by auto loans were sold four years ago, according to Stanislav Ponomarenko, a fixed- income analyst at ING Groep NV in Moscow. Securities linked to vehicle debt in the U.S. represent about $34 billion of the $55 billion in bonds tied to consumer and business lending this year, according to data compiled by Charlotte, North Carolina- based Bank of America Corp.