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Rating Action:

Moody's affirms Mitsubishi Corp's A2 ratings; changes outlook to stable

 The document has been translated in other languages

27 Jul 2018

Tokyo, July 27, 2018 -- Moody's Japan K.K. has affirmed Mitsubishi Corporation's A2 issuer and senior unsecured debt ratings, (P)A2 senior unsecured MTN program rating, Baa1 subordinated debt ratings, as well as its P-1 Commercial Paper and (P)P-1 short-term MTN program ratings.

At the same time, Moody's has changed the ratings outlook to stable from negative.

A full list of affected ratings, which include those for Mitsubishi's supported subsidiaries, is provided at the end of this press release.

RATINGS RATIONALE

"Mitsubishi has demonstrated a track record of lowering financial leverage over the past two years to a level that is now sustainable under its conservative financial policy," says Masako Kuwahara, a Moody's Vice President and Senior Analyst.

"We also assume that Mitsubishi will remain disciplined in its investments, keeping its outlays within its internal cash flow and preventing a material rise in debt," adds Kuwahara.

Mitsubishi's reported gross debt peaked at JPY6.3 trillion in the fiscal year ending March 2015 (fiscal 2014), but the company reduced it to below JPY5 trillion in fiscal 2017.

The recovery in commodity prices, especially for metallurgical coal, and the steady improvement in its non-commodity-sensitive businesses have increased cash flow over the past two years, and have led to a reduction in debt and a fall in leverage.

Moody's forecasts that Mitsubishi has incremental capacity to further reduce leverage -- as measured by debt/capitalization -- to below 45% in the next 12-18 months and to maintain FFO/debt above 15% during the same period, positioning the company strongly among its Japanese trading company peers.

At the same time, Moody's notes that Mitsubishi's portfolio has a volatile component, due to its large investments in metals and energy commodities that causes its cash flow to be more variable than those of other Japanese trading companies.

Moody's acknowledges Mitsubishi's strategy to limit further exposure to those volatile businesses and to shift its growth toward investments, which are less commodity-price sensitive, and where the company can exercise greater managerial control.

If successful, this portfolio realignment will help to stabilize cash flow over the next several years.

In addition, Mitsubishi's A2 ratings reflect its leading franchise value and market profile as the largest Japanese trading company in terms of assets, which is indicative of its extensive geographic and business portfolio diversity.

Moody's notes that Mitsubishi continues to benefit from strong relationships with its main banks, which result in a degree of uplift from its underlying credit profile.

Upward ratings pressure could emerge if Mitsubishi can demonstrate leverage at a lower level, such as debt/capitalization below 35% and FFO/debt above 25%.

Downward ratings pressure could emerge if Moody's expects that Mitsubishi's leverage will remain high, for example, debt/capitalization exceeding 50% or FFO/debt falling below 13% on a sustained basis; its business risks materially increase; or the company adopts a more shareholder-return-focused financial policy.

The principal methodology used in these ratings was Trading Companies (Japanese) published in July 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Mitsubishi Corporation, headquartered in Tokyo, is Japan's largest trading company by assets.

RATINGS AFFECTED:

Issuer: Mitsubishi Corporation

Outlook, Changed To Stable From Negative

- Issuer Rating, Affirmed A2

- Senior Unsecured Medium-Term Note Program, Affirmed (P)A2/(P)P-1

- Senior Unsecured Shelf, Affirmed (P)A2

- Senior Unsecured Regular Bond/Debenture, Affirmed A2

- Senior Unsecured Bank Credit Facility, Affirmed A2

- Subordinate debt, Affirmed Baa1

- Commercial Paper, Affirmed P-1

Issuer: MC Finance & Consulting Asia Pte. Ltd.

Outlook, Changed To Stable From Negative

- Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)A2

Issuer: MC Finance Australia Pty Ltd

Outlook, Changed To Stable From Negative

- Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)A2/(P)P-1

- Backed Senior Unsecured Regular Bond/Debenture, Affirmed A2

Issuer: Mitsubishi Corporation Finance PLC

Outlook, Changed To Stable From Negative

- Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)A2/(P)P-1

- Backed Commercial Paper: Affirmed P-1

- Backed Senior Unsecured Regular Bond/Debenture, Affirmed A2

Issuer: Mitsubishi Development Pty. Ltd

Outlook, Changed To Stable From Negative

- Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)A2/(P)P-1

Issuer: Mitsubishi International Corporation

Outlook, Changed To Stable From Negative

- Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)A2/(P)P-1

- Backed Commercial Paper, Affirmed P-1

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's Japan K.K. is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 2. The Financial Services Agency has not imposed any supervisory measures on Moody's Japan K.K. in the past year.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Masako Kuwahara
Vice President - Senior Analyst
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Mihoko Manabe
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

No Related Data.
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