[Funding]'Imported Car Sales Up' Doich Financial Raises 28 Billion Won in Operating Funds

[Asia Economy Reporter Lim Jeong-su] Deutsche Financial, an installment finance company for imported cars, issued a private bond worth 28 billion KRW with the support of its parent company, Deutsche Motors. Recently, as luxury imported car sales increased due to a surge in revenge consumption caused by COVID-19, demand for installment financing through Deutsche Financial has grown.

According to the investment banking (IB) industry on the 13th, Deutsche Financial recently issued a private bond worth 28 billion KRW under the management of Hi Investment & Securities. Following the issuance of 15 billion KRW worth of one-year maturity bonds on the 10th, it issued an additional 13 billion KRW worth of private bonds with the same maturity on the 11th. The bond issuance interest rate was 3.70% for all.

Deutsche Financial is a subsidiary of Deutsche Motors and operates automobile installment financing business in Korea. Deutsche Motors is the major shareholder holding 75% of common and preferred shares. KB Capital also holds 12.40% of preferred shares.

The major shareholder, Deutsche Motors, sells new and used German imported cars such as BMW, MINI, Porsche, Jaguar, and Land Rover in Korea. Chairman Kwon Oh-soo and his son Kwon Hyuk-min, among related parties, hold 31.94% of the shares. Deutsche Motors provided a payment guarantee for Deutsche Financial’s private bond issuance.

Deutsche Financial is known to plan to use the raised funds as operating capital. As imported car sales have increased recently, the need for operating funds for automobile installment financing business has grown.

According to related industries, as revenge consumption due to COVID-19 has increased, the sales volume of imported cars has recently surged. The cumulative sales volume of BMW until April this year increased by about 38% compared to the same period last year. Sales of the BMW X series, which has a high sales margin, increased by 74% during the same period. Sales of Porsche, classified as a top luxury model, increased by as much as 121%.

Kim Seung-hoe, a researcher at DS Investment & Securities, said in a recent report, "Due to the reduction of individual consumption tax and the increase in revenge consumption replacing overseas travel, the boom in the high-priced imported car market will continue," and predicted, "Not only the demand for new car installment financing of Deutsche Financial but also the demand for installment financing related to used cars sold by its affiliate Deutsche Autoworld will continue to increase."