Fitch Affirms Toyota Motor Credit Corp. and Affiliates at 'A'; Outlook Remains Stable
The rating action follows Fitch's affirmation today of Toyota Motor Corporation's (TMC) ratings at 'A' with a Stable Outlook. For more information on Fitch's rating rationale, please see 'Fitch Affirms Toyota at 'A'; Outlooks Stable,' dated October 15, 2015.
KEY RATING DRIVERS - IDR AND SENIOR DEBT
The ratings for TMCC and its affiliates are equalized and linked to those of its parent, TMC, since Fitch views these issuers as core subsidiaries of TMC. The equalization reflects strong implicit and explicit factors including high percentage of TMC sales financed by the subsidiaries, significant operational linkages between the companies and the existence of a credit support agreement between the parent and the subsidiaries.
Credit Quality Normalization
Credit quality remains strong but continues to show signs of normalization. The net loss rates for fiscal year 2015 (FY15; 12 months ended March 31, 2015) and the three months ended June 30, 2015 (1Q16; first quarter 2016) were up slightly year-over-year, but losses remained low overall and favorable compared to captive finance peers, which reflects the prime nature of the portfolio. Delinquencies 60+ days have also remained solid but have continued to increase slightly year-over-year through fiscal year-end 2015 and June 30, 2015. Fitch expects asset quality performance to remain strong but to normalize from current levels throughout the remainder of calendar year 2015 driven by an expected moderation in used car values.
Operating Margin Contraction
TMCC continued to report solidly profitable operating results through FY15 and 1Q16. When adjusted for non-cash derivatives losses, the company reported pre-tax margin of 16.6% in FY15 (down from 18.6% in FY14) and 16.3% in 1Q16 (down from 19.5% in 1Q15). While TMCC's revenues continue to increase, driven by portfolio growth which has led to a higher average earning asset balance, adjusted operating margins have fallen due to an increase in credit loss provisioning and a lower effective portfolio yield.
Although Fitch expects margins to continue to contract driven by a normalizing credit environment, higher interest rates and increased competition, Fitch also expects TMCC to retain robust profitability adjusted for non-cash derivatives gains/losses in FY16.
Elevated Leverage; Ability to Suspend Dividends
Leverage, as measured by debt to tangible equity, ended 1Q16 at 10.7x and remains high relative to peers, despite falling from a pre-crisis high of 17.8x at FYE09. Nevertheless, TMCC manages leverage via dividend payments to the parent and Fitch finds comfort in the ability of the company to suspend these payments, as was demonstrated in the downturn, when dividends were suspended in FY07 and FY08.
Strong Access to Capital; Heightened Use of Commercial Paper
TMCC's funding profile is strong and diversified by type, term and currency. Term funding requirements are met through the issuance of a variety of debt securities in both the U.S. and international capital markets. TMCC primarily relies on unsecured debt for its funding needs, with unsecured long-term debt and commercial paper (CP) accounting for 87% of debt as of 1QE16.
CP issuance in particular, has increased since the crisis and accounted for a material portion (29%) of debt at 1QE16, which Fitch views negatively. However, Fitch notes that TMCC's CP program is supported by sizeable liquidity back-up, including $8.9 billion in cash and marketable securities on balance sheet and $20.8 billion in committed backup credit facilities. In addition, CP is covered under the credit support agreement with the parent, TMC, which provides an additional source of backup liquidity.
RATING SENSITIVITIES
TMCC's ratings are linked to those of its parent, TMC. However, a negative rating action for TMCC and its affiliates could be driven by a change in the perceived relationship between TMC and TMCC and its affiliates, such as if Fitch believed that the subsidiaries had become less core to the parent's strategic operations or adequate financial support was not provided in a time of need. Additionally, the recognition of consistent operating losses, a material increase in leverage, and or deterioration in TMCC's liquidity profile could also yield negative rating action for TMC and a therefore, for TMCC and its affiliates.
Positive rating momentum for TMCC will be limited by Fitch's view of TMC's credit profile. Fitch cannot envision a scenario where TMCC would be rated higher than its parent.
Fitch has affirmed the following ratings:
Toyota Motor Credit Corporation
Toyota Motor Finance (Netherlands) B.V.
Toyota Credit Canada Inc.
Toyota Finance Australia Limited
Toyota Kreditbank GmbH
--Long-Term Issuer Default Rating (IDR) at 'A';
--Short-term IDR at 'F1';
--Senior unsecured debt at 'A';
The Rating Outlook is Stable.
Contact:
Primary Analyst
Richard Wilusz
Associate Director
+1-312-368-5459
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60654
Secondary Analyst
Nathan Flanders
Managing Director
+1-212-908-0827
Committee Chairperson
Sean Pattap
Senior Director
+1-212-908-0642
Media Relations: Hannah James, New York, Tel: + 1 212 908 0500, Email: hannah.james@fitchratings.com.
Additional information is available on www.fitchratings.com
The following issuer(s) did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure: Toyota Kreditbank GmbH, Toyota Motor Credit Corporation, Toyota Finance Australia Limited, Toyota Motor Finance (Netherlands) B.V., Toyota Credit Canada Inc.
Applicable Criteria
Global Non-Bank Financial Institutions Rating Criteria (pub. 28 Apr 2015)
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
Endorsement Policy - Fitch's approach to ratings endorsement so that ratings produced outside the EU may be used by regulated entities within the EU for regulatory purposes, pursuant to the terms of the EU Regulation with respect to credit rating agencies, can be found on the EU Regulatory Disclosures page. The endorsement status of all International ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for all structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
Комментарии