Volkswagen's head of capital markets, Albrecht Moehle, shares his views on the market... Q. How has your borrowing strategy changed as the market has become more credit aware? A. Our strategy has changed, but not because of increased credit awareness. We are not a frequent borrower. We are moving away from traditional ways of financing, away from credit lines and into the capital markets. We have finalized the update of our groupwide debt issuance programmes, signalling to the market that we are looking for a diversified funding resource. Q. How do you reassure investors about your credit? A. Generally speaking we do not do roadshows and we did not feel it necessary to do a benchmark deal. We prefer to rely on our rating. Volkswagen has had a good and close relationship with Moody's and Standard & Poor's for the last 10 years. The annual rating reviews are always very detailed. As long as we have a stable outlook our good name recognition means that there is no need for a roadshow to meet investors. The one exception is if we are trying to open up a completely new investor base. For example, last year we signed a Z600 million domestic CP programme and we did a roadshow in Poland for this specific new investor base. Q. How important is it to be a pan-European household name in selling your story? A. It definitely helps being so well known. And if you are in the market rarely, like us, it helps even more. Compared to other single-As we are more aggressive. And though DaimlerChrysler and BMW are more frequent issuers we are more opportunistic. Q. Is competition increasing among corporate credits in Europe? A. Yes, definitely. The increase in activity in the corporate Euromarket is phenomenal. Much of this is due to M&A activity. Q. What percentage of your investors are non-domestic? And how does this compare to a year ago? A. Roughly 80% of our investors are from abroad. This has not changed since the start of Emu. Our dealer panel is made up of banks with huge international distribution capabilities and they ensure that our paper is sold around the world. Q. What sort of structures are investors interested in buying from you? A. We are not proactive in the market so we wait for investors to come to us and suggest things. But we are not shy of any structures. We are hardly ever offered plain vanilla. We are price-driven and plain vanilla is not competitive for us. Q. How important is it for you to be a frequent borrower, able to build your own yield curve as triple-As can? A. At the moment we are happy being an infrequent issuer. But Volkswagen Bank, which was added as an issuer to our Euro-MTN programme at the end of last year, is a new name in the market. So we might want to build a yield curve for it. Because the average life of our car loans is 60 months or less, we are not interested in issuing anything longer than five-year paper. Q. How do you feel about the market going online? Are you happy for your levels to be posted on a screen that everyone can access? A. We know that this is a development that we cannot stop. All the banks must do it. And whoever does not will lose out. As long as we can post and achieve our present aggressive levels then we do not have a problem with them being posted. We are proud of our levels and are happy for everyone to see them. Q. Do you think borrowers' relationships with their dealers will suffer as a result of online trading? A. To a point, yes. The role of banks will change. But our dealer panel do everything for us, across the world. Relationships will not suffer just because trading happens online. But the role of dealing desks will change. Q. How do you see the market developing in 2000? A. Demand will increase, issuing will increase and volumes will increase as corporates move to the capital markets. M&A activity and the lack of credit lines from banks means that capital markets will be the main funding resource for corporates.
August 04, 2000
