TRIS Rating Co., Ltd. has affirmed the ratings of Toyota Leasing (Thailand) Co., Ltd.’s (TLT or Issuer) existing guaranteed debentures under the Bt40,000 million medium-term debenture program at “AAA”. TRIS Rating has also affirmed the “T1+” ratings to TLT’s Bt7,000 million (1/2010) and Bt10,000 million (1/2011) guaranteed debentures under the short-term program. At the same time, TRIS Rating has assigned a “AAA” rating to TLT’s proposed issue of up to Bt4,000 million in guaranteed debentures under the medium-term program. The proceeds from the issuance of the new debentures are for debt refinancing and loan portfolio expansion.
Both the medium- and short-term debentures of TLT are guaranteed by Toyota Motor Finance (Netherlands) B.V., (TMF or Guarantor). TMF is a wholly-owned subsidiary of Toyota Financial Service Corporation (TFS), which is 100% held by Toyota Motor Corporation (TMC), the ultimate parent company. All three companies, TMF, TFS and TMC, are rated “AA-” by Standard & Poor’s (S&P), and “Aa2” by Moody’s Investors Service (Moody’s), with short-term issue ratings at “A-1+” by S&P and at “P-1” by Moody’s.
TRIS Rating reported that TMC’s market position has been affected by the quality-related issues since the beginning of 2010. TRIS Rating considers the recent earthquakes and tsunami in Japan on 11 March 2011 may delay the amelioration of TMC’s financial and operating performances, which have been gradually improving since the second half of FY2010. Although the company’s plants have not suffered from any significant damage, adjustments of production in both the Japanese and overseas plants are ongoing due to shipping delays and shortages of components. At least in the short term, TRIS Rating expects TMC’s operating performance is going to be affected from the production halt, even though some production plants resumed operation in late March 2011. It will remain a challenge for TMC to improve profitability.
Excluding the impact of the earthquakes and tsunami, TRIS Rating said, TMC’s overall performance has improved since late FY2010, supported by a recovery of the global automobile industry, cost reduction efforts according to TMC’s emergency profit improvement program, and increased profits from the financial service business. TMC reported a net profit of 209 billion yen in FY2010, recovering from a net loss of 437 billion yen in FY2009. The financial performance continued to improve in FY2011 with 383 billion yen in net profit during the first three quarters of FY2011, compared with 97 billion yen for the same period in FY2010.
The ratings of TLT’s both medium- and short-term debentures reflect the unconditional and irrevocable guarantee by TMF, whose rating is based on the credit strength of TMC. Under this guarantee structure, TMC provides a Credit Support Agreement (CSA) to TFS, which in turn provides a CSA to TMF. Under the terms of the CSA, TMC will provide sufficient liquidity for the obligations of bonds or debentures and commercial papers of both subsidiaries, TFS and TMF. TMC will also provide sufficient liquidity for TMF’s guarantee obligations. The guarantee is governed by the Dutch law and is unconditional and irrevocable. It provides punctual payment for the debenture holders of all sums payable by TLT. For the guarantee of both the medium- and short-term debentures, the obligations of TMF rank at least pari passu with all other present and future unsecured and unsubordinated indebtedness of TMF. The guarantee cannot be amended or terminated without the consent of both the debenture holders’ representatives and the Guarantor.
The Guarantor will not be under any obligation to make payment for the Issuer’s failure to pay as a result of any of the following actions by any Thai government agency: (1) interruption of payment by causing Issuer to be unable to transfer monies or to convert foreign currency to the Registrar or debenture holders to pay debt obligations; (2) causing the transfer of majority shareholding in, or control over, the Issuer to a third-party not associated with the Toyota Group; (3) expropriation or nationalization of at least 10% of the net value of hire purchase receivables of the Issuer and its subsidiaries; (4) expropriation or nationalization that has the effect of preventing the Issuer and its subsidiaries from carrying on business. TRIS Rating believes that the above events are highly unlikely to occur.
The “stable” outlook reflects the creditworthiness of TLT’s ultimate parent, TMC, which has strong positions in major markets despite being weakened by product quality-related issues as well as the effects of the earthquakes and tsunami in Japan. The TMC’s strong market positions are supported by its extensive geographic and product diversification. Currently, TMC’s rating outlook assigned by S&P is “stable”, which has been revised from “negative” after S&P downgraded TMC’s rating from “AA” to “AA-” on 4 March 2011. TMC’s company and issue ratings of long-term senior debentures have been “under review for possible downgrade” by Moody’s since 6 April 2011, after previously replacing the “negative” outlook. The action reflects Moody’s view that TMC’s financial and operating performance will worsen in the aftermath of the earthquakes and tsunami and from the result of supply chain disruptions. However, TMC’s current company ratings of “AA-” assigned by S&P and “Aa2” by Moody’s still reflect TMC’s relatively strong credit profile when compared with the “AAA” national scale rating in TRIS Rating’s database of rated companies in Thailand. -- End
Rating Outlook: Stable
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