Frankfurt am Main, June 02, 2020 -- Moody's Investors Service, ("Moody's") has
today confirmed the A2 long term issuer rating and the Prime-1
(P-1) short-term rating of Bayerische Motoren Werke Aktiengesellschaft
(BMW). The outlook on all ratings changed to negative from ratings
under review. This rating action concludes a review for possible
downgrade that began on March 25, 2020.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The confirmation of BMW's ratings reflects Moody's view that
the company should be able to post a solid recovery in its operations
and financial profile from the second half of 2020 onwards with credit
metrics appropriate for the A2 rating by year-end 2022.
The automotive downturn brought on by the coronavirus will cause a pronounced
weakening in BMW's credit metrics. We expect that during
2020, BMW's Moody's adjusted EBITA margin could fall
below 3%, compared with 5.8% in 2019.
The expected recovery will be driven by the group's highly competitive
position as a leading premium car manufacturer with a global footprint
and a track record of relative sustainable performance against most peers
even in highly volatile market environment. With regards to its
global operations, we believe that the group's set up in China
where it has built significant local production will be a key contributor
to the turnaround as this market recovers to more normal levels.
Moody's forecasts for the global automotive sector a 20%
decline in unit shipments during 2020, with a steep year-over
year contraction in the second and third quarters followed a modest rebound
in the fourth quarter. We expect 2021 industry unit sales to rebound
and grow by approximately 11%. However, future demand
for vehicles could be weaker that our current estimates, the already
competitive environment in the auto sector could intensify further,
and BMW could encounter greater headwinds than currently anticipated.
BMW's strong liquidity position affords it the capacity to fund
sizable cash requirements that might arise under a potentially extended
downturn in the global automotive market as a result of the coronavirus
pandemic. BMW has constant financing needs related to the funding
of its customers, while the industrial activities should be largely
self-funding. As of 31 March 2020, the company's sources
of cash included of more than €18 billion in cash and marketable
debt securities (before any haircut), as well as €8.0
billion in capacity under its unutilised credit facility. In addition,
we recognize BMW's ability to access the U.S. Federal Reserve
Bank's as well as the European Central Bank's refinancing windows by pledging
certain qualifying assets.
BMW's potential cash uses include capital spending, dividend payments,
working capital and day-to-day needs, as well as a
sizeable amount of short-term debt maturities principally related
to its finance captive operations. As these captive operations
are largely self-liquidating because of the amortising nature of
its credit contracts, such a liquidity situation is acceptable despite
BMW's high rating category.
The negative outlook reflects the potentially severe impact that the coronavirus
could have on BMW's operating performance and credit metrics into
2021 and that the currently expected recovery may be harder to achieve.
ESG RISK
The widening spread of the coronavirus outbreak, deteriorating global
economic outlook, falling oil prices, and asset price declines
are creating a severe and extensive credit shock across many sectors,
regions and markets. The global automotive industry is one of the
sectors that will be most severely impacted by the outbreak. The
vulnerability of BMW's products to a potentially steep downturn
in demand heightens the importance a healthy liquidity profile.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Further negative pressure would build if BMW fails to return to meaningful
operating profit generation in the second half of 2020. A prolonged
and deeper slump in demand than currently anticipated leading to higher
demand in liquidity, a more severe deterioration of its balance
sheet and a longer path to restoring credit metrics in line with an A2
credit rating, including an adjusted EBITA margin of above 7%
and meaningful free cash flow (Moody's-defined) generation,
could also lead to further negative pressure on the rating.
Given the current market situation we do not anticipate any short-term
positive rating pressure. A stabilization of the market situation
leading to a recovery in metrics to pre-outbreak levels could lead
to positive rating pressure. More specifically (1) an adjusted
Debt/EBITDA to drop back sustainably below 1x and (2) an adjusted EBITA
margin to increase sustainably above 8% could lead to upward rating
pressure.
LIST OF AFFECTED RATINGS:
..Issuer: Bayerische Motoren Werke Aktiengesellschaft
Confirmations, previously placed on review for downgrade:
.... LT Issuer Rating, Confirmed at
A2
....Commercial Paper, Confirmed at P-1
....Senior Unsecured Medium-Term Note
Program, Confirmed at (P)A2
....Other Short Term, Confirmed at (P)P-1
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW Australia Finance Ltd.
Confirmations, previously placed on review for downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)A2
....BACKED Other Short Term, Confirmed
at (P)P-1
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW Canada Inc.
Confirmations, previously placed on review for downgrade:
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at A2
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW Finance N.V.
Confirmations, previously placed on review for downgrade:
....BACKED Commercial Paper, Confirmed
at P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)A2
....BACKED Other Short Term, Confirmed
at (P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at A2
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW International Investment B.V.
Confirmations, previously placed on review for downgrade:
....BACKED Commercial Paper, Confirmed
at P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)A2
....BACKED Other Short Term, Confirmed
at (P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at A2
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW Japan Finance Corp.
Confirmations, previously placed on review for downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)A2
....BACKED Other Short Term, Confirmed
at (P)P-1
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
..Issuer: BMW US Capital, LLC
Confirmations, previously placed on review for downgrade:
....BACKED Commercial Paper, Confirmed
at P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)A2
....BACKED Other Short Term, Confirmed
at (P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at A2
Outlook Actions:
....Outlook, Changed To Negative From
Ratings Under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Automobile Manufacturer
Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062773.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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 ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are 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_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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.
Falk Frey
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
