Mexican used-car start-up Kavak secures $810 million in debt financing

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MEXICO CITY, Sept 20 (Reuters) – Mexican used-car platform Kavak said on Tuesday it had secured $675 million in funding from HSBC (HSBA.L) to support the company’s auto loan offerings, adding to other recent credit lines agreed with Goldman Sachs and Santander totaling $135 million.

The deal will put more drivers on the streets of Latin America, where only 1.5 in 10 people own a car, according to Kavak, which operates in Brazil, Colombia, Argentina, Chile and Peru as well as in Mexico.

The financing from HSBC is in the form of a forward flow agreement, Kavak said, in which the bank will purchase rights of collection for a set of used car loans from Kavak.

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“I understand it’s never been done with a wallet like this, for cars,” chief financial officer Moises Flores told Reuters.

The funding will also be used to reduce barriers to accessing auto loans in general, Kavak said, since a large portion of Latin Americans do not have formal bank accounts or credit options.

The agreement with HSBC is in addition to recently agreed asset backing lines of credit for $100 million from Goldman Sachs Group Inc (GS.N) and $35 million from Spain’s Santander (SAN.MC), depending on the company.

“The risk of loaning to Kavak is low,” Flores said. “They also look at our portfolio, our funding, and they say, ‘It looks good’.”

Kavak, which bills itself as the world’s largest used-car operation, was Mexico’s first “unicorn,” a startup worth more than $1 billion.

At present, SoftBank-backed Kavak (9984.T) claims to be worth more than $8.7 billion.

The forward flow agreement allows Kavak to expand its lending without risking its valuation. Carvana Co (CVNA.N), a publicly traded US company with a similar business model, saw its market value plummet to $6.3 billion from a high of $58 billion last July.

Given Tuesday’s deals, the company could be on track to raise $1.2 billion in debt by the end of the year, Flores said, also hinting at potential expansion into other future markets.

The startup expanded outside of Latin America for the first time, launching its operations in Turkey in July. Read more

“We financed ourselves cheaply. Our debt is cheap, even under a AAA bond on the Mexican stock exchange,” he said.

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Reporting by Kylie Madry; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.


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