New York, May 31, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 24 May 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Finance Companies Methodology published in November 2019. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Finance Companies Methodology
Profitability: a finance company's long-term profitability is a core element of its ability to generate capital and support creditor obligations, and core or recurring profitability is the first line of defense to absorb credit-related losses and losses stemming from market, operational and business risk.
Capital Adequacy and Leverage: capital adequacy is a key element in the assessment of a finance company's ability to absorb asset volatility, including write-downs, or the impact of a systemic crisis that causes dislocation in financial markets. Ample capital enhances financial flexibility, which may support access to capital markets in times of stress. Finance companies with lower leverage have more strategic alternatives; they are better able to fund growth and acquisitions or to divest themselves of non-core businesses and absorb losses on discontinued operations.
Asset quality: asset quality is a primary driver of earnings and capital formation for some finance companies, including lenders and business development companies. These types of finance company often have a concentration in a single asset class or operate in niche sectors that are intrinsically higher risk (e.g., subprime) and that can be vulnerable to changing investor sentiment irrespective of expected asset quality performance. However, asset quality considerations are immaterial for those finance companies that are service providers and similar companies that have predominantly cash flow-based businesses; and accordingly, asset quality considerations typically are not a core component of the analysis for these.
Cash flow and liquidity: the ability of a finance company to access liquidity on a recurring basis is an essential component of its operating model. Most finance companies rely heavily on confidence-sensitive wholesale funding which increases liquidity risk in times of stress.
Operating environment: a finance company's operating environment can over time have as much, if not more, of a bearing on its long-term viability as the intrinsic strength of their own operations. Operating environment considerations include the relevant economic, judicial, regulatory, institutional, and general operating conditions that may affect finance companies' creditworthiness.
Other qualitative considerations: important other qualitative considerations that can affect a finance company's creditworthiness include the extent of its business diversification, concentration and franchise positioning, the extent of the opacity and complexity of its activities, its corporate behavior and risk management, and its liquidity management.
Support and structural analysis: a finance company's ratings may be positively affected by the capacity and willingness of its affiliates and public bodies to provide it with support.
Sovereign or parent constraint: a finance company's ratings may be negatively affected by a constraint related to the relatively lower creditworthiness of its sovereign or parent.
Instrument-level rating considerations: individual instrument ratings also factor in notching considerations based on the seniority and collateral of the instruments.
• Adira Dinamika Multi Finance Tbk (P.T.)
• Astra Sedaya Finance (P.T.)
• AVIC Industry-Finance Holdings Co., Ltd.
• Bank of Communications Financial Leasing
• Bocom Leasing Development HK Co. Ltd.
• Bocom Leasing Management Hong Kong Co Ltd
• Cagamas Berhad
• CCB Financial Leasing Corporation Ltd.
• CDB Aviation Lease Finance Desgn. Acty. Co.
• China Aircraft Leasing Group Holdings Limited
• China Chengtong Hong Kong Company Limited
• China Cinda Asset Management Co., Ltd.
• China Development Bank Financial Leasing
• China Great Wall Asset Management Co., Ltd.
• China Huarong Asset Management Co., Ltd.
• China Huarong Financial Leasing Co., Ltd.
• China Merchants Commerce Financial Leasing
• China Orient Asset Management Co., Ltd.
• Clover Aviation Capital Company Limited
• CMB Financial Leasing Co., Ltd.
• EVN Finance Joint Stock Company
• Export-Import Bank of Malaysia Berhad
• Federal International Finance (P.T.)
• GOHO Asset Management Co., Ltd.
• Guangxi Financial Investment Group Co., Ltd
• Guangzhou Asset Management Co., Ltd.
• Henan Zhongyuan Financial Holding Co., Ltd.
• Hero FinCorp Limited
• Hong Kong Mortgage Corporation Ltd. (The)
• Housing and Urban Development Corp Ltd
• Hyundai Capital Services, Inc.
• ICBC Financial Leasing Co., Ltd.
• IIFL Finance Limited
• Indiabulls Housing Finance Limited
• Indian Renewable Energy Develop. Agency Ltd.
• KB Capital Co.,Ltd.
• KB Kookmin Card Co., Ltd.
• Lembaga Pembiayaan Ekspor Indonesia
• Lionbridge Capital Co., Limited
• Lionbridge Financing Leasing (China) Co., Ltd
• Minsheng Financial Leasing Co., Ltd
• Mongolian Mortgage Corporation HFC LLC
• Muthoot Finance Limited
• Power Finance Corporation Limited
• REC Limited
• Shaanxi Financial Asset Management Co., Ltd.
• SHBANK Finance Company Limited
• Shinhan Capital Co., Ltd.
• Shinhan Card Co., Ltd.
• VPBank SMBC Finance Company Limited
• Woori Card Co., Ltd.
The principal methodology used for these rated entities was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts
Third-party credit support: The goal of third-party credit support is to substitute the credit risk of the support provider for the credit risk of the issuer. For credit substitution to be achieved, investors must be insulated from the risk of payment default by the underlying obligor. Generally, the long-term ratings on credit-supported transactions track the long-term rating assigned to the credit provider.
Additional Considerations: Credit substitution requires more than just the presence of a credit support instrument from a third-party credit provider. The transaction documentation provides clear instructions to ensure that payments under the credit support facility are made when due and that there are no impediments to the timely payment of debt service. The key elements evaluated include: mitigation of bankruptcy risk of issuer; sufficiency of credit support; structural provisions which provide for the timely payment of debt service; bondholders to be paid in full if credit support expiration or termination will result in a change.
• Bayfront Infrastructure Management Pte. Ltd.
• Clifford Capital Pte. Ltd.
The principal methodology used for these rated entities was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Government-Related Issuers Methodology
Assigning a Baseline Credit Assessment (BCA): The majority of Government-Related Issuers (GRIs) begin with an assessment of the GRI's standalone strength (i.e. BCA) – its ability to service and repay outstanding debt without recourse to extraordinary support from the supporting government - using the published sector-specific methodology that is most suitable for the predominant activities of the GRI. Our assessment of standalone strength includes any day-to-day support received from the government that can be clearly distinguished from extraordinary support. Support mechanisms, such as an obligation of the government to ensure the GRI's solvency and liquidity, are reflected in the BCA when they are legally or contractually documented.
Government uplift: The GRI's ratings include any uplift due to systemic support and typically focus on three structural factors and three factors explaining the level of the government's willingness to provide support. Structural factors address the legal and quasi-legal aspects of the government's relationship with the GRI and include: (1) guarantees, (2) ownership level and (3) barriers to support. The factors underlying willingness consider the softer connections between the two entities and include (4) the likelihood of government intervention, (5) political linkages and (6) economic importance. Support is determined using a joint default analysis framework which considers an estimate of the likelihood of extraordinary support, an assessment of the credit quality of the supporting government, and default correlation between the two entities.
GRIs without a BCA: In limited instances, it is not possible or meaningful to assign a BCA. The GRI is so inextricably linked to the government that a meaningful standalone BCA cannot be derived. In such cases, a top-down analytical approach is used that chiefly considers the ability and willingness of the government to provide timely support, instead of the usual bottom-up approach of starting with the BCA and then considering uplift towards the government's rating.
• Cagamas Berhad
• China Cinda Asset Management Co., Ltd.
• China Great Wall Asset Management Co., Ltd.
• China Orient Asset Management Co., Ltd.
• Export-Import Bank of Malaysia Berhad
• Henan Zhongyuan Financial Holding Co., Ltd.
• Hong Kong Mortgage Corporation Ltd. (The)
• Housing and Urban Development Corp Ltd
• Indian Renewable Energy Develop. Agency Ltd.
• Lembaga Pembiayaan Ekspor Indonesia
• Power Finance Corporation Limited
Key Rating Considerations
The principal methodology used for these rated entities was Captive Finance Subsidiaries of Nonfinancial Corporations published in August 2019. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Captive Finance Subsidiaries of Nonfinancial Corporations
Analysis of the interrelationship between the ratings of industrial companies and their captive finance subsidiaries typically involves three principal assessments:
Assessing stand-alone credit quality of the parent and captive: Industrial company financial analysis is very different from finance company analysis, and simply analyzing a parent and its captive on a consolidated basis can give very misleading impressions of credit strength. For instance, the combined balance sheet of an industrial company and its captive finance subsidiary might seem highly leveraged in comparison to a peer industrial company that does not have a captive finance subsidiary. But upon splitting the businesses apart, it might become apparent that the greater level of debt associated with the finance business is appropriate given the nature of its assets, and that the industrial business is only moderately leveraged. It is therefore important to make an assessment of the difference in the stand-alone credit quality between the parent company and the captive; that is to assess the credit quality of the finance company on its own excluding any parental support, and then to separately assess the credit quality of the industrial operations after deconsolidating the finance subsidiary.
Assessing the drag on the parent rating posed by the potential need to support the captive: For industrial companies that produce high ticket capital equipment such as automobiles, construction equipment and airplanes, the ownership of a captive finance subsidiary is often a critical component of the sales and distribution process. Captive finance subsidiaries assist manufacturers by providing floor plan financing for dealers and provide support for sales to end users through retail sales financing and lease financing. The operation of a captive finance subsidiary brings important risks in that the captive subsidiary requires significant access to capital to fund its portfolio. The inability of a captive finance subsidiary to maintain a competitive cost of capital can render it unable to effectively compete with other lenders. Failing to provide support for a captive that is viewed by the capital markets as a key component of the parent's operations can have important reputational risks for the parent and could adversely affect its ability to access the capital markets. The potential drag on the parent company's rating is assessed using two methods the Capital Call Assessment and the Potential Liquidity Call Assessment.
Assessing the lift of the captive finance subsidiary's credit quality provided by parental support: It is critical to understand the business relationship and the contractual relationship between a parent and captive in assessing the credit quality of a captive finance subsidiary. Because captive finance subsidiaries are critical elements of the marketing and sales strategies of industrial companies, the credit quality of the captive can be directly influenced by the ability and willingness of the parent to provide support. We consider contractual support in the form of guarantees or support agreements that might exist between a parent and captive. However, in the absence of a strong guarantee, support agreements are typically less important than our assessment of how the business relationship might motivate the parent to support or not support the captive. The potential lift on the captive finance subsidiary's credit quality is assessed using two methods: The Assessment of Guarantees and the Qualitative Assessment of Support.
• Hyundai Capital Services, Inc.
The principal methodology used for these rated entities was Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese) published in August 2019. Please see the Rating Methodologies page on https://ratings.moodys.com/japan/ratings-news for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese)
Analysis of the interrelationship between the ratings of industrial companies and their captive finance subsidiaries typically involves three principal assessments:
Assessing stand-alone credit quality of the parent and captive: Industrial company financial analysis is very different from finance company analysis, and simply analyzing a parent and its captive on a consolidated basis can give very misleading impressions of credit strength. For instance, the combined balance sheet of an industrial company and its captive finance subsidiary might seem highly leveraged in comparison to a peer industrial company that does not have a captive finance subsidiary. But upon splitting the businesses apart, it might become apparent that the greater level of debt associated with the finance business is appropriate given the nature of its assets, and that the industrial business is only moderately leveraged. It is therefore important to make an assessment of the difference in the stand-alone credit quality between the parent company and the captive; that is to assess the credit quality of the finance company on its own excluding any parental support, and then to separately assess the credit quality of the industrial operations after deconsolidating the finance subsidiary.
Assessing the drag on the parent rating posed by the potential need to support the captive: For industrial companies that produce high ticket capital equipment such as automobiles, construction equipment and airplanes, the ownership of a captive finance subsidiary is often a critical component of the sales and distribution process. Captive finance subsidiaries assist manufacturers by providing floor plan financing for dealers and provide support for sales to end users through retail sales financing and lease financing. The operation of a captive finance subsidiary brings important risks in that the captive subsidiary requires significant access to capital to fund its portfolio. The inability of a captive finance subsidiary to maintain a competitive cost of capital can render it unable to effectively compete with other lenders. Failing to provide support for a captive that is viewed by the capital markets as a key component of the parent's operations can have important reputational risks for the parent and could adversely affect its ability to access the capital markets. The potential drag on the parent company's rating is assessed using two methods the Capital Call Assessment and the Potential Liquidity Call Assessment.
Assessing the lift of the captive finance subsidiary's credit quality provided by parental support: It is critical to understand the business relationship and the contractual relationship between a parent and captive in assessing the credit quality of a captive finance subsidiary. Because captive finance subsidiaries are critical elements of the marketing and sales strategies of industrial companies, the credit quality of the captive can be directly influenced by the ability and willingness of the parent to provide support. We consider contractual support in the form of guarantees or support agreements that might exist between a parent and captive. However, in the absence of a strong guarantee, support agreements are typically less important than our assessment of how the business relationship might motivate the parent to support or not support the captive. The potential lift on the captive finance subsidiary's credit quality is assessed using two methods: The Assessment of Guarantees and the Qualitative Assessment of Support.
• Honda Finance Co., Ltd.
The principal methodology used for these rated entities was Finance Companies Methodology (Japanese) published in November 2019. Please see the Rating Methodologies page on https://ratings.moodys.com/japan/ratings-news for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Finance Companies Methodology (Japanese)
Profitability: a finance company's long-term profitability is a core element of its ability to generate capital and support creditor obligations, and core or recurring profitability is the first line of defense to absorb credit-related losses and losses stemming from market, operational and business risk.
Capital Adequacy and Leverage: capital adequacy is a key element in the assessment of a finance company's ability to absorb asset volatility, including write-downs, or the impact of a systemic crisis that causes dislocation in financial markets. Ample capital enhances financial flexibility, which may support access to capital markets in times of stress. Finance companies with lower leverage have more strategic alternatives; they are better able to fund growth and acquisitions or to divest themselves of non-core businesses and absorb losses on discontinued operations.
Asset quality: asset quality is a primary driver of earnings and capital formation for some finance companies, including lenders and business development companies. These types of finance company often have a concentration in a single asset class or operate in niche sectors that are intrinsically higher risk (e.g., subprime) and that can be vulnerable to changing investor sentiment irrespective of expected asset quality performance. However, asset quality considerations are immaterial for those finance companies that are service providers and similar companies that have predominantly cash flow-based businesses; and accordingly, asset quality considerations typically are not a core component of the analysis for these.
Cash flow and liquidity: the ability of a finance company to access liquidity on a recurring basis is an essential component of its operating model. Most finance companies rely heavily on confidence-sensitive wholesale funding which increases liquidity risk in times of stress.
Operating environment: a finance company's operating environment can over time have as much, if not more, of a bearing on its long-term viability as the intrinsic strength of their own operations. Operating environment considerations include the relevant economic, judicial, regulatory, institutional, and general operating conditions that may affect finance companies' creditworthiness.
Other qualitative considerations: important other qualitative considerations that can affect a finance company's creditworthiness include the extent of its business diversification, concentration and franchise positioning, the extent of the opacity and complexity of its activities, its corporate behavior and risk management, and its liquidity management.
Support and structural analysis: a finance company's ratings may be positively affected by the capacity and willingness of its affiliates and public bodies to provide it with support.
Sovereign or parent constraint: a finance company's ratings may be negatively affected by a constraint related to the relatively lower creditworthiness of its sovereign or parent.
Instrument-level rating considerations: individual instrument ratings also factor in notching considerations based on the seniority and collateral of the instruments.
• Honda Finance Co., Ltd.
• Mitsubishi HC Capital Inc.
• ORIX Corporation
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on https://ratings.moodys.com for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
Please see the Issuer page on https://ratings.moodys.com/japan/ratings-news for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action.
For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.com
for the most updated credit rating action information and rating history.
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