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Rating Action:

Moody's assigns a first-time Baa1 long-term issuer rating to Hyundai Capital Canada, Inc.; outlook is stable

07 Apr 2021

New York, April 07, 2021 -- Moody's Investors Service, ("Moody's") assigned a first-time Baa1 long-term issuer rating to Hyundai Capital Canada, Inc. The outlook is stable.

Hyundai Capital Canada's long-term issuer rating of Baa1 and its stable outlook are aligned with those of its ultimate parent Hyundai Motor Company (Hyundai Motor Company, HMC, Baa1 stable), consistent with Moody's Methodology of Captive Finance Subsidiaries of Nonfinancial Corporations. This is based on Hyundai Capital Canada's strategic significance to its parent, our expectation that HMC would support Hyundai Capital Canada, if required, as well as the explicit support agreement in place between the two companies.

Assignments:

..Issuer: Hyundai Capital Canada, Inc.

....LT Issuer Rating, Assigned Baa1

Outlook Actions:

..Issuer: Hyundai Capital Canada, Inc.

....Outlook, Assigned Stable

RATINGS RATIONALE

The assignment of Hyundai Capital Canada's rating reflects Moody's assessment of the company's ba3 standalone assessment and both explicit and implicit affiliate support from HMC.

Hyundai Capital Canada's ba3 standalone assessment is supported primarily by the company's adequate capital cushion that protects creditors against unexpected losses, as well as good asset quality. Hyundai Capital Canada's tangible equity to tangible assets capital was 9.2% at 30 September 2020. As the company's grows its asset base supported by better automotive environment, Hyundai Motor Company's new car model launches and increased penetration rates, the capital will moderately decline but Moody's expects it to remain close to the 9.0% range. The company does not have a history of capital distributions to the parent, which is a credit positive.

Hyundai Capital Canada's asset quality is strong (net charge offs / loans of 0.1% for the first nine months 30 September 2020). However it only started its operations in 2014 and therefore its track record has been limited through the economic cycles. Additionally, Hyundai Capital Canada has a sizeable lease portfolio (63% of receivables portfolio at 30 September 2020) making it vulnerable to a rapid decline of used car prices. The company has been increasing the size of its loan portfolio in the last nine months through 30 September 2020 (37% of total receivables as compared to 24% at 31 December 2019) as it expanded its loan finance offering to a greater number of Hyundai dealerships. Additionally, Moody's expects that used car prices will remain relatively stable in 2021, supported, albeit temporarily, by the semiconductor shortage which have reduced the production of new vehicles.

Additional credit challenges for Hyundai Capital Canada include its exposure to the performance trends of its parent and its significant use of securitization, which Moody's believes will remain relatively high given the company's relatively limited operating track record. A relatively high use of securitization increases the amount of encumbered assets, limiting the company's access to alternate sources of liquidity.

Moody's has assessed Hyundai Capital Canada's exposure to environment risks as high, similar to its parent, reflecting the firm's exposure to the automotive sector. The automotive sector is one of the thirteen industries that is most vulnerable to carbon transition risk.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Hyundai Capital Canada's rating could be upgraded if the ratings for its parent HMC are upgraded.

The rating could be downgraded following a downgrade of the ratings for its parent HMC. A downward adjustment of Hyundai Capital Canada's standalone assessment without change of parent support assumptions is unlikely to impact the final ratings.

The methodologies used in this rating were Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099, and Captive Finance Subsidiaries of Nonfinancial Corporations published in August 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1183459. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Hyundai Capital Canada, Inc. (Hyundai Capital Canada), a majority-owned subsidiary of Hyundai Motor Company (HMC), was incorporated in Canada in 2014. It provides indirect retail passenger loans financing, and is the sole provider of leasing financing for Hyundai Motor and Kia Motors products in Canada. It also provided wholesale inventory and working capital financing to dealers until the end of 2018. The company had total assets of C $2.8 billion at 30 September 2020.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Inna Bodeck
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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