Honda May Raise 100 Billion Yen to Finance Car Loans

Honda Motor Co., Japan’s second- largest carmaker, may raise about 100 billion yen ($1 billion) by selling asset-backed securities or commercial paper to fund car loans as it expects demand to recover later this year.

The credit environment “has changed dramatically,” said Executive Vice President Koichi Kondo in an interview yesterday, adding that the funds would also be used to repay debt. Interest rates “may be the cheapest we’ve ever borrowed at.”

Honda expects global vehicle sales to rise to 1.65 million units in the second half of the year ending in March, compared with 1.55 million units in the first half. More people buying cars will require more money available for loans, Kondo said.

“If you don’t need to borrow, that means things are looking bad,” he said.

In the first five months of the year, Tokyo-based Honda’s sales in the U.S., its biggest market, plunged 34 percent as higher unemployment deterred buyers. In Japan, sales have dropped 16 percent. The company’s new Insight hybrid helped it withstand a 29 percent industrywide sales decline in its home market during the period.

Honda’s fundraising plan would follow the company’s sale of 70 billion yen in three-year bonds on June 4, its first bond issue in 16 years. Rival Toyota Motor Corp., Japan’s biggest carmaker, also plans to increase a planned bond sale 63 percent to about 130 billion yen, according to two bankers familiar with the deal. Sony Corp. earlier this week raised 220 billion yen in its biggest-ever bond sale.

“Automakers want to make sure that they secure funds when they can by as much as they can,” said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Tokyo-based Chiba-gin Asset Management Co. “The borrowing environment is now much easier.”