Big Four back dealer finance plan
Australia's major banks are backing a $2b finance package to assist car dealersAustralia' big four banks have agreed terms to provide $2b dollars of transitional funding to the Australian retail auto sector.
The agreement was announced today in a statement by Australian Treasurer, Wayne Swan.
The funding will come in the form of a "Special Purpose Vehicle" (SPV). The SPV, Swan says, will be "established with the support of leading Australian banks to provide liquidity to car dealer financiers who have encountered financing difficulties as a result of the global financial crisis".
The funding is designed to bolster financially viable dealership businesses while alternative long-term credit arrangements can be implemented. In the main the funding will replace existing dealership floor plan monies. 'Floor plan' is the method via which the vast majority of dealers fund their new (and used) car stock.
The announcement follows a meeting of the heads of ANZ, the Commonwealth Bank of Australia, the National Australia Bank, and Westpac. At the meeting it was agreed to provide "critical liquidity support to car dealerships" affected by the withdrawal from the Australian market of key wholesale automotive finance providers GE Money and GMAC.
According to Swan, the Australian Government, assisted by the Future Fund Chairman, David Murray, has been working to broker the solution for a number of weeks.
The SPV will be established as a "financing trust". This is described as "a private sector solution which will provide liquidity to car dealer financiers through the securitisation of eligible loans provided to car dealers".
The new financing body will kick-off operations on January 1. The expected size of the fund will be around $2b.
The Treasurer says the Australian Government will provide support to the SPV "in the form of a guarantee expected to cover a minor proportion of the securities issued".
Technical support to develop the SPV will be provided by Credit Suisse. The SPV will operate with government support for a period of 12 months, after which its funding level will run down.
The SPV will be available to both new vehicle and mixed vehicle dealerships. In addition to car dealers, it will cover trucks, motorcycles, boats, caravans and other commercial vehicles financed by GE Money or GMAC.
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