TRIS Rating Co., Ltd. has assigned a “AAA” rating to Toyota Leasing (Thailand) Co., Ltd.’s (TLT or Issuer) proposed issue of up to Bt2,150 million in guaranteed debentures under Bt30,000 million medium-term debenture program. At the same time, TRIS Rating has affirmed the “AAA” ratings of TLT’s existing guaranteed debentures of Bt27,850 million under the same program. The outlook remains “stable”.
TRIS Rating reported that the 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 “Aa1” 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 rating outlooks for TMF, TFS and TMC have been recently revised to “watch negative” by S&P on 5 February 2010 and “ratings under review for possible downgrade” by Moody’s on 9 February 2010, following elevated concern over Toyota’s product quality-related issues and associated recalls which started in late January 2010. The recalls will cause extraordinary costs, and raise the risk that TMC’s financial performance may recover at a slower pace than previously expected. TMC, as with other automakers, suffered huge losses in FY2009 due to the downturn in the global economy and the contraction in demand for vehicles. In addition, brand reputation and competitive position in key markets will be unavoidable affected by the recalls.
Nevertheless, TMC’s financial performance gradually improved, having net income for two consecutive quarters, after a hard hit by rapid downturn of major global automobile markets in the second half of FY2009 (April 2008-March 2009) and the first quarter of FY2010. TMC reported net loss of 165 billion yen and 766 billion yen, respectively, in the third quarter and the fourth quarter of FY2009. Net income improved to 153 billion yen for the third quarter of FY2010, from net income of 22 billion yen in the second quarter of FY2010 and net loss of 78 billion yen in the first quarter of the same fiscal year. Net income for the first three quarters of FY2010, therefore, was positive of 97 billion yen. On 4 February 2010, TMC forecasted net income for FY2010 to be 80 billion yen, up from a net loss at 437 billion yen in FY2009.
TRIS Rating said, the ratings of TLT’s medium-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 bond or debenture and commercial paper 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 for punctual payment to 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’ representative 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.
TRIS Rating also mentioned that the “stable” outlook of TLT reflects the creditworthiness of the company’s ultimate parent, TMC, who has strong positions in major markets despite being weakened by quality-related issues. The market positions are supported by its extensive geographic and product diversification. TMC’s rating outlook has been placed on “watch negative” by S&P and “ratings under review for possible downgrade” by Moody’s, which mean the ratings have a chance to be downgraded by those international rating agencies in the near future. However, TMC’s current company ratings of “AA” by S&P and “Aa1” 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
- TLT104A: Bt3,000 million guaranteed debentures due 2010 Affirmed at AAA - TLT107A: Bt1,500 million guaranteed debentures due 2010 Affirmed at AAA - TLT108A: Bt1,700 million guaranteed debentures due 2010 Affirmed at AAA - TLT10NA: Bt3,100 million guaranteed debentures due 2010 Affirmed at AAA - TLT10NB: Bt1,200 million guaranteed debentures due 2010 Affirmed at AAA - TLT112A: Bt2,900 million guaranteed debentures due 2011 Affirmed at AAA - TLT112B: Bt4,000 million guaranteed debentures due 2011 Affirmed at AAA - TLT114A: Bt3,000 million guaranteed debentures due 2011 Affirmed at AAA - TLT124A: Bt1,000 million guaranteed debentures due 2012 Affirmed at AAA - TLT128A: Bt1,800 million guaranteed debentures due 2012 Affirmed at AAA - TLT129A: Bt1,150 million guaranteed debentures due 2012 Affirmed at AAA - TLT12DA: Bt2,000 million guaranteed debentures due 2012 Affirmed at AAA - TLT13DA: Bt1,500 million guaranteed debentures due 2013 Affirmed at AAA - Up to Bt2,150 million guaranteed debentures due within 2015 AAA Rating Outlook: Stable
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