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HomebanksSantander US auto arm raises $1.8 billion in IPO

Santander US auto arm raises $1.8 billion in IPO

Santander Consumer USA, a provider of auto loans to subprime buyers, has raised $1.8 billion from an initial public offering amid a recovery in U.S. car sales and strong investor interest in high-yielding loans sold by consumer finance companies.

The company, which is controlled by the Spanish bank Santander, sold 75 million shares, or about 21.5 percent of its shares, at $24 each on Wednesday after increasing the size of the offering and moving it up by one day.

A US listing will allow private equity investors Warburg Pincus, KKR and Centerbridge Partners to sell a large portion of their combined 25 percent stake, which they acquired in 2011 for $1 billion. The trio are cutting their stake to 7 percent.

(Read more: Subprime deja vu: Car lending standards ease)

Bank of Santander HeadquartersGetty Images

Santander Consumer USA will not receive any of the proceeds from the offering, which values the entire company at $8.3 billion.

The bulk of the remaining shares offered to investors have come from Santander, which will retain about 61 percent of the company's shares after listing.

The IPO is the latest consumer finance company to see strong interest from stock investors. Shares in Springleaf, the former subprime consumer lending arm of the bailed-out insurer AIG, have climbed 51 percent since raising $411 million from an October IPO.

(Read more: US automakers fall further behind foreign brands)

Santander Consumer offers loans to car buyers, including to those with weaker credit histories. It says it has relationships with over 14,000 car dealerships in the U.S..

The company also securitizes car loans, having issued and sold over $26 billion in packaged loans since 2010 according to its prospectus. With benchmark interest rates hovering near historic lows, issuance of these securities is expected to remain robust in 2014 as investors chase higher returns.


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