Toyota lifts profile of minority-owned firms

PLANO, Texas — Toyota's captive finance company has quietly employed a clever way to add some heft to the automaker's broad diversity efforts, using bond issues led exclusively by minority- and women-owned financial firms to boost their profiles while giving clients access to lucrative offerings.

Toyota Financial Services, which serves Toyota and Lexus buyers — and now Mazda customers as well under a licensing agreement — has been issuing "Diversity & Inclusion Bonds" since 2013. Last year, the company issued a fifth, $750 million tranche of two-year, fixed-rate D&I bonds to underwrite its ongoing consumer lending, and it will continue to do so going forward, Mark Templin, the captive's CEO, told Automotive News in June.

"We've had great success with our D&I bonds," he said, adding that the company had issued more than $3 billion in D&I bonds over the last eight years.

In the transaction last year, the lead book-building managers included Blaylock Van; CastleOak Securities; Great Pacific Securities; Ramirez & Co.; and Siebert Williams Shank — which are either minority-owned or women-owned broker-dealers.

To dealership customers, the D&I bond issues are virtually invisible — they simply fund vehicle transactions and other products.

But to the businesses selling the bonds to investors, it places them on equal or better footing with much more established or larger financial firms.

"This offering marks their fifth D&I issuance ... and will stand out not only because of the utilization of minority-owned firms as bookrunners, but also for the pricing with the lowest two-year fixed rate coupon to date," David Jones, CEO of CastleOak Securities, said in a written statement after the successful 2020 bond issue. "This highlights the fact that prioritizing diversity can lead to remarkable performance."

The strategy is similar to one Toyota Financial Services has employed for some time to capture interest from investors seeking to put their money into environmental causes.

It has sold $7.6 billion in "Green Bonds" since it began offering them in 2014, including a $1.6 billion offering in June.

The bonds support consumer lending for the automaker's most environmentally friendly vehicles, such as the Toyota Camry Hybrid, Corolla Hybrid, Prius, Prius Prime, RAV4 Prime and Mirai.