TRIS Rating has affirmed the ratings of Toyota Leasing (Thailand) Co., Ltd.’s (TLT or Issuer) guaranteed debentures, issued under its Bt40,000 million medium-term debenture program, at “AAA”. TRIS Rating has also affirmed the ratings of TLT’s guaranteed debentures, with a total value of Bt40,000 million, issued under the short-term debenture programs 1/2012 and 2/2012, at “T1+”. The outlook remains “stable”.
Both the 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 and at “Aa3” by Moody’s Investors Service (Moody’s), with short-term issue ratings at “A-1+” by Standard and Poor’s and at “P-1” by Moody’s. The ratings of TLT’s short- and medium-term debentures reflect the unconditional and irrevocable guarantee given 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 has in turn provided a CSA to TMF. Under the terms of the CSA, TMC will provide sufficient liquidity for the obligations of bonds, 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 Dutch law and is unconditional and irrevocable. The guarantee 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 debentureholders’ representatives and the Guarantor, TMF.
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 debentureholders 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 its major markets, despite being weakened by product quality-related issues and the effects of two natural disasters in 2011. TMC’s strong market positions are supported by its extensive geographic coverage and product diversity. Currently, TMC’s rating outlooks assigned by both Standard and Poor’s and Moody’s are “negative”. The “negative” outlooks reflect the concerns of both credit rating agencies regarding several factors: the effects of the disasters and the possible burden on TMC’s operating and financial performances plus concerns over TMC’s eroding market share and competitive position. However, TMC’s current company ratings of “AA-” assigned by Standard and Poor’s 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.
TMC’s automobile production and sales volumes in FY2012 were nearly the same levels in FY2011. Consolidated production was 7.435 million units in FY2012, a 3.7% rise from the 7.169 million units produced in FY2011. Consolidated sales were 7.352 million units in FY2012, almost the same as the 7.308 million units sold in FY2011. Production and sales volumes continued to recover in the first half of FY2013, as shown by a year-on-year (y-o-y) growth of 43.2% in production to 4.400 million units, and a 49.2% y-o-y rise in sales volume to 4.516 million units.
TMC’s net operating income has steadily improved, rising from 75.4 billion yen in the second quarter of FY2012 (July 2011 - September 2011) to 149.6 billion yen and 238.5 billion yen in the third and fourth quarter of FY2012. Net operating income rose to 353.1 billion yen in the first quarter of FY2013 and dropped slightly to 340.6 billion yen in the second quarter of FY2013. However, operating income was improved substantially to 693.7 billion yen in the first half of FY2013 from an operating loss of 32.6 billion yen in the first half of 2012. TMC’s operating profit margin also improved, rising to 6.4% in the first half of FY2013 compared with a margin of -0.4% in the first half of FY2012 and 1.9% for the whole FY2012.
TMC’s performance is expected to improve in FY2013 because there is a demand backlog and TMC will launch several new car models. TMC’s financial performance is also expected to improve, due to its marketing and cost reduction efforts. However, the strong yen remains a constraint on its performance. TMC’s market position and competitiveness are strong, supported by its broad product lines, wide geographic market coverage, technological leadership, and a low level of financial risk.
TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2013, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.