Tokyo, May 27, 2020 -- Moody's Japan K.K. has confirmed the A1 long-term
ratings of Toyota Motor Corporation and its captive finance subsidiaries,
as well as the Prime-1 commercial paper ratings.
At the same time, Moody's has confirmed Toyota Financial Services
(South Africa) Ltd.'s (TFSSA) global scale rating on its
backed senior unsecured domestic medium-term note (DMTN) program
at (P)A2.
TFSSA is the South African captive finance subsidiary of Toyota,
and its notes are supported by various entities within the Toyota group.
The outlook changed to negative from ratings under review.
This rating action concludes the review for downgrade initiated on 26
March 2020.
A full list of the affected ratings and outlooks can be found at the end
of this press release.
RATINGS RATIONALE
Toyota's A1 rating incorporates the company's excellent liquidity,
which provides it with the flexibility to fund sizable cash requirements
that might arise under a potentially extended downturn in the global automotive
market caused by the coronavirus outbreak.
The rapid and 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 combined credit effects
of these developments are unprecedented. The automotive industry
has been one of the sectors most significantly affected by the shock given
its sensitivity to consumer demand and sentiment.
Moody's forecasts a steep decline in global vehicle sales in the
fiscal year ending March 2021 (fiscal 2020) due to the effects of the
coronavirus, and expects Toyota's automotive EBITA margin
could fall below 4% in fiscal 2020, down from about 9%
in fiscal 2019.
However, Moody's expects Toyota's abundant liquidity
will help it manage through the downturn over the next few years while
the company restores its margin to pre-outbreak levels.
Toyota has historically maintained its EBITA margin in the 8%-9%
range, which is distinctly higher than for global peers.
Toyota's A1 ratings remains the highest among global auto manufacturers,
reflecting its industry-leading market position with a wide geographic
reach and strong brand recognition across a broad product line.
The company has a track record of operational rigor that has helped it
to maintain a higher margin than its peers. While Toyota,
like other automakers, faces uncertainty regarding alternative fuel
and autonomous driving technologies and future business models,
the company's well-established hybrid vehicle franchise will
help it meet carbon emissions requirements in various markets.
The company has a strong balance sheet with substantial liquid assets
and very low leverage.
The negative outlook reflects the downside risk from the pandemic over
the next 12 to 18 months. The outlook also incorporates the potential
that Toyota's sales could be weaker than Moody's current forecasts.
Moody's assumes unit sales for the global automotive sector to decline
by 20% in 2020 and rebounding by 11.5% in 2021.
TFSSA's (P)A2 global scale rating is based on the guarantee provided by
Toyota Motor Finance (Netherlands) B.V. (TMFNL, A1
negative). In turn, TMFNL has a credit support agreement
with its parent Toyota Financial Services Corporation (TFS, A1 negative),
which in turn has a credit support agreement with Toyota.
At the same time, the one-notch difference between TFSSA
and its guarantor's A1 rating reflects the risk that TMFNL's guarantee
may not provide for timely and effective payments to creditors in the
event of potential tail risk scenarios, which is captured in South
Africa's bond ceiling.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if Toyota fails to restore EBITA margin
to the 7%-9% over the coming two years. A
greater than expected slump in demand that weakens Toyota's liquidity
and balance sheet would also result in a downgrade.
An upgrade is unlikely, given the negative outlook due to the near-term
impact from the coronavirus and the longer term structural changes facing
the auto industry. Nevertheless, the rating could be upgraded
in the longer term if Toyota sustains the automotive segment's EBITA margin
above 12% and debt/EBITDA materially below 1.0x, while
maintaining its net cash position around current levels.
The following environmental, social and governance (ESG) factors
are material to the rating outcome, although both are mitigated
by Toyota's excellent liquidity.
First, Moody's regards the coronavirus pandemic as a social
risk, given its implications for public health and safety and the
impact on consumer demand for autos.
Second, environmental considerations include carbon transition risks,
such as vehicle electrification and emission regulations, that necessitate
sizable investments and compliance costs.
The principal methodology used in rating Toyota Motor Corporation was
Automobile Manufacturer Industry (Japanese) published in July 2017 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_196366.
The principal methodologies used in rating Toyota Motor Finance (Netherlands)
B.V. and Toyota (GB) PLC were Automobile Manufacturer Industry
(Japanese) published in July 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_196366,
and Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese)
published in August 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1183460.
The principal methodologies used in rating Toyota Financial Services (UK)
PLC, Toyota Financial Services (South Africa) Ltd.,
Toyota Financial Services Corporation, Toyota Finance Australia
Limited, Toyota Finance Corporation, Toyota Finance New Zealand
Limited, Toyota Leasing GmbH and Toyota Kreditbank GmbH were Captive
Finance Subsidiaries of Nonfinancial Corporations (Japanese) published
in August 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1183460,
and Finance Companies Methodology (Japanese) published in November 2019
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187106.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Headquartered in Aichi, Japan, Toyota Motor Corporation is
Japan's largest automaker by units sold.
The local market analyst for Toyota Financial Services (South Africa)
Ltd.'s ratings is Dion Bate, 9714-237-9504.
The following ratings are affected:
..Issuer: Toyota Motor Corporation
....Long-term Issuer Rating,
Confirmed at A1
....Senior Unsecured Regular Bond/Debenture
(Local and Foreign Currency), Confirmed at A1
....Senior Unsecured Shelf (Foreign Currency),
Confirmed at (P)A1
....Commercial Paper (Local Currency),
Confirmed at P-1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Financial Services (UK) PLC
....Backed Commercial Paper (Foreign Currency),
Confirmed at P-1
..Issuer: Toyota Financial Services (South Africa)
Ltd.
....Backed Senior Unsecured Medium-Term
Note Program (Local Currency), Confirmed at (P)A2
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Financial Services Corporation
....Backed Long-term Issuer Rating,
Confirmed at A1
....Backed Long-term Issuer Rating
(Local Currency), Confirmed at A1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Finance Australia Limited
....Backed Long-term Issuer Rating,
Confirmed at A1
....Backed Long-term Issuer Rating
(Local Currency), Confirmed at A1
....Backed Senior Unsecured Regular Bond/Debenture
(Local and Foreign Currency), Confirmed at A1
....Backed Senior Unsecured Medium-Term
Note Program (Local and Foreign Currency), Confirmed at (P)A1
....Backed Commercial Paper (Local and Foreign
Currency), Confirmed at P-1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Finance Corporation
....Backed Long-term Issuer Rating,
Confirmed at A1
....Backed Long-term Issuer Rating
(Local Currency), Confirmed at A1
....Backed Senior Unsecured Regular Bond/Debenture
(Local Currency), Confirmed at A1
....Backed Senior Unsecured Shelf (Local Currency),
Confirmed at (P)A1
....Backed Commercial Paper (Local Currency),
Confirmed at P-1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Finance New Zealand Limited
....Backed Long-term Issuer Rating,
Confirmed at A1
....Backed Long-term Issuer Rating
(Local Currency), Confirmed at A1
....Backed Senior Unsecured Medium-Term
Note Program (Local Currency), Confirmed at (P)A1
....Backed Senior Unsecured Regular Bond/Debenture
(Local Currency), Confirmed at A1
....Backed Commercial Paper (Local Currency),
Confirmed at P-1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota Leasing GmbH
....Backed Commercial Paper (Local Currency),
Confirmed at P-1
..Issuer: Toyota Motor Finance (Netherlands) B.V.
....Backed Long-term Issuer Rating,
Confirmed at A1
....Backed Long-term Issuer Rating
(Local Currency), Confirmed at A1
....Backed Senior Unsecured Medium-Term
Note Program (Foreign Currency), Confirmed at (P)A1
....Backed Senior Unsecured Regular Bond/Debenture
(Local and Foreign Currency), Confirmed at A1
....Backed Commercial Paper (Local and Foreign
Currency), Confirmed at P-1
....Outlook, changed to Negative from
Ratings Under Review
..Issuer: Toyota (GB) PLC
....Backed Commercial Paper (Local Currency),
Confirmed at P-1
..Issuer: Toyota Kreditbank GmbH
....Backed Commercial Paper (Local Currency),
Confirmed at P-1
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.
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_1133569.
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.
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.
Mariko Semetko
VP - Senior Credit Officer
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
