OREANDA-NEWS. December 15, 2015. Fitch Ratings Indonesia has affirmed the Long-Term Issuer Default Ratings (IDRs) and National Long- and Short-Term Ratings on PT Astra International Tbk's multi-finance subsidiaries as follows:

- PT Astra Sedaya Finance (ASF): 'BBB-', 'AAA(idn)' and 'F1+(idn)'
- PT Federal International Finance (FIF): 'AAA(idn)' and 'F1+(idn)'
- PT Surya Artha Nusantara Finance (SANF): 'AA(idn)' and 'F1+(idn)'
- PT Toyota Astra Financial Services (TAFS): 'AAA(idn)' and 'F1+(idn)'

The Outlooks are Stable. A full rating breakdown is provided at the end of this commentary.

'AAA' National Ratings denote the highest rating assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

'AA' National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs slightly from that of the country's highest rated issuers or obligations.

'F1' Short-Term National Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating.

KEY RATING DRIVERS

IDRS and NATIONAL RATINGS
The ratings affirmations on ASF, FIF and SANF reflect Fitch's expectation that the companies will continue to benefit from strong support and commitment from their majority shareholder, PT Astra Internasional Tbk (AI). AI is Indonesia's largest private company by market capitalisation, and dominates the country's automotive and heavy equipment sectors. It is 50.1% owned by Jardine Cycle & Carriage Ltd, which is part of the Jardine Matheson Group.

Both ASF and FIF are majority-owned by AI and significantly contribute to expanding the latter's car and motorcycle manufacturing and distributor business in Indonesia. ASF provides direct financing services for AI's car sales while FIF provides direct financing services for the purchase of Honda motorcycles produced by Astra Honda Motor, a 50-50 joint venture between AI and Honda Motor Co., Ltd (A/Stable).

SANF's ratings take into account its limited importance to the Astra Group. SANF provides financing services to companies that buy heavy equipment from PT United Tractors Tbk, the Astra Group's heavy equipment distribution subsidiary in Indonesia. However, SANF's importance to AI, in Fitch's view, is limited and not as strong as that of ASF and FIF, as SANF has the smallest franchise of 2.5% of AI's total assets. The Stable Outlooks reflects Fitch's expectations that AI will continue to support ASF, FIF and SANF if required.

The affirmation of TAFS's ratings reflects its strong support from Toyota Financial Services Corporation (TFSC), one of its two major shareholders. TFSC is a wholly owned subsidiary of Toyota Motor Corporation (TMC; A/Stable), one of the biggest automotive manufacturers in the world. As part of the Toyota group, TAFS benefits from product knowledge and funding support. The latter is derived from TMC's strong relationship with Japanese banks and Japanese government-backed financial institutions.

TAFS also benefits from support from AI, the other major shareholder, particularly in dealership networks. AI is a leading car distributor in Indonesia and holds exclusive rights to sell Toyota vehicles in the country. The Stable Outlook reflects Fitch's expectations that TMC and AI will continue to support TAFS if needed.

The significant weakening of the automobile market in Indonesia and global commodity markets has led to deterioration in asset quality and profitability among the four multi-finance companies and could impact their standalone credit profiles.

Fitch expects the profitability ASF, FIF and TAFS to be under pressure in the near to medium term due mainly to potential higher credit costs, but high provision coverage should help to cover credit losses through economic cycles. In 3Q15, net charge-offs increased moderately for ASF and TAFS compared with FIF, which focuses on more risky motorcycle financing. The non-performing loan (NPL) ratios of ASF, FIF and TAFS remained manageable at below 1% of total net managed receivables at end-September 2015, which was lower than its peers.

SANF's net charge-off and NPL ratio increased significantly during 2014-3Q15 due to its substantial exposure to commodity-related industries, such as coal mining and plantations, which have suffered a severe downturn since 2012. Fitch expects SANF's asset quality to remain under pressure until there is a substantial global economic recovery that also lifts commodity prices.

DEBT RATINGS
The bonds and debt programmes of the four subsidiaries are rated at the same level as the issuers' National Long-Term and Short-Term Ratings. ASF's foreign-currency notes are rated at the same level as its Long-Term IDR.

RATING SENSITIVITIES

IDRS and NATIONAL RATINGS
A significant drop in contribution from ASF, FIF and SANF to AI in term of credit sales would result in negative rating action. A notable decline in AI's ownership or significant increase of management independence would also exert downward pressure on the ratings of ASF, FIF and SANF, although Fitch considers this prospect to be remote in the foreseeable future, given the importance of ASF to AI's car business, FIF to AI's and Astra Honda Motor's motorcycle business, and SANF to AI's heavy equipment business.

Any decline in TMC's ownership would exert downward pressure on TAFS's ratings as would a decline in support from both shareholders. However, Fitch sees this prospect as remote in the foreseeable future, given TAFS's strategic role in TMC's and AI's Toyota car financing business.

Any change in AI's credit profile would have an impact on ASF's IDR. There is no rating upside for national ratings of ASF, FIF and TAFS as they are rated at the top of the national scale. For SANF, a significant increase of its strategic importance to AI - likely caused by higher AI ownership, and common group branding or a significant increase in SANF's asset contribution to AI - may result in positive rating action.

DEBT RATINGS
Any changes in the issuers' international and National Ratings would affect the issue ratings.

The rating actions are as follows:

ASF
Long-Term IDR affirmed at 'BBB-'; Outlook Stable
Short-Term IDR affirmed at 'F3'
National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Rupiah senior unsecured bond tranches under programme II 2013 affirmed at 'AAA(idn)'/'F1+(idn)'
US dollar euro medium-term note (EMTN) programme 2015 and tranches under the programme affirmed at 'BBB-'

FIF
National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Rupiah senior unsecured bond tranches under programme I 2012 affirmed at 'AAA(idn)'/F1+(idn)'
Rupiah senior unsecured bond tranches under programme II 2015 affirmed at 'AAA(idn)'/'F1+(idn)'

SANF
National Long-Term Rating affirmed at 'AA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Rupiah senior unsecured bond II affirmed at 'AA(idn)'
Rupiah medium-term notes IV affirmed at 'AA(idn)'
Rupiah senior unsecured bonds tranches under programme I 2013 affirmed at 'AA(idn)'

TAFS
National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Rupiah senior unsecured bond tranches under programme I 2014 affirmed at 'AAA(idn)'/'F1+(idn)'
Rupiah senior unsecured bonds III 2013 affirmed at 'AAA(idn)'/'F1+(idn)'