TRIS Rating Co., Ltd. has assigned a “T1+” rating to Toyota Leasing (Thailand) Co., Ltd.’s (TLT or Issuer) guaranteed debentures of up to Bt20,000 million under the short-term debenture program (1/2012). At the same time, TRIS Rating has also affirmed the ratings of TLT’s guaranteed debentures under the Bt40,000 million medium-term debenture program at “AAA” and the ratings of TLT’s Bt10,000 million guaranteed debentures under the short-term debenture program (1/2011) at “T1+”. The outlook remains “stable”.
Both short- and medium-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 at “AA-” by Standard & Poor’s (S&P), and at “Aa3” 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. The ratings of TLT’s short- and medium-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 has provided a Credit Support Agreement (CSA) to TFS, which in turn provided 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 the medium-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; and (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. TMC has strong positions in major markets despite being weakened by product quality-related issues, the effects of the earthquakes and tsunami in Japan, and the severe floods in Thailand. TMC’s strong market positions are supported by its extensive geographic and product diversity. Currently, TMC’s rating outlooks assigned by both S&P and Moody’s are “negative”. The “negative” outlooks reflect the agencies’ concerns surrounding the effects of the earthquakes and the possible burden on TMC’s operating and financial performance, as well as concern over TMC’s eroding market share and competitive position. However, TMC’s current company ratings of “AA-” assigned by S&P and “Aa3” 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.
TRIS Rating reported that TMC’s performance has recovered since FY2010 (April 2009-March 2010) after the effects from the quality-related issues in FY2009. The company reported a net profit of 209 billion yen in FY2010, recovering from a net loss of 437 billion yen in FY2009. Performance continued to improve in FY2011 with 408 billion yen in net profit.
Unfortunately, the great earthquakes and tsunami in Japan on 11 March 2011 hurt TMC’s performance in FY2012. Production was halted in Japanese and overseas plants due to shipping delays and shortages of components. As a result, consolidated production fell by 424 thousand units to 5,025 thousand units for the first nine months of FY2012 (April 2011-December 2011), compared with production of 5,449 thousand units for the same period in FY2011. In the first nine months of FY2012, sales dropped by 522 thousand units to 4,995 thousand units versus sales of 5,517 thousand units during the first nine months of the prior fiscal year. TMC reported net income of 163 billion yen for the first nine months of FY2012, down from 383 billion yen in the same period of FY2011.
The severe floods in Thailand during late 2011 also cut Toyota Group’s worldwide production due to the supply chain disruptions since many parts and components were produced in Thailand. However, the effect is expected not to be as severe as the effects from the earthquakes. In addition to the effects from the disasters, the strengthening yen has also constrained the company’s profitability. The amelioration of TMC’s financial and operating performances is expected to be delayed. TMC still faces a challenge to improve its profitability. However, the company’s strong market and competitive position are supported by its diversified markets and products, technological leadership, and a low level of financial risk, said TRIS Rating. - End
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