Bangkok--Jun 6--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned an expected National Long-term rating of ‘AAA(tha)’ to the upcoming THB1.0 billion guaranteed debentures due in 2008 to be issued by Tri Petch Isuzu Sales Company Limited (“TIS”). The rating is based entirely on the full, irrevocable and unconditional guarantee by its parent, Mitsubishi Corporation (“MC”, rated LTFC ‘A’ Outlook Stable). At the same time, the agency has also affirmed the National Long-term rating of ‘AAA(tha)’ on TIS’s THB3.5bn amortising and guaranteed debentures due in 2008. The rating is based entirely on the full, irrevocable and unconditional guarantee by MC, and the irrevocable and unconditional principal guarantee by Japan Bank for International Cooperation (“JBIC”).
For the new bond issue, as MC’s rating is at the same level of Thailand sovereign rating (rated LTFC ‘A’ Outlook Stable), the guaranteed debentures are rated at the same level as Thailand’s sovereign National rating of ‘AAA(tha)’. Fitch says that any changes in the International rating differential between MC and the Thai sovereign will affect the debentures’ National rating. The expected rating is contingent upon receipt of final documents conforming to information already received.
The ratings of MC - the largest general trading company in Japan - reflect its leading position in the general trading company sector as well as strong credit profile, as evidenced by the company’s relatively conservative financial strategy, strong earnings growth and consolidated business diversity. MC has a proven resilience to adverse change in economic and market conditions, relative to its peers. MC reported the historical high core earnings of JPY331bn in fiscal year ending March 2005, a 56% increase from the previous year. The ratings also reflect high earnings cyclicality and the investment risk inherent in the general trading companies’ business model. The ratings also take into consideration concerns about MC’s announcement that it would provide both operational and financial aid to Mitsubishi Motor Corporation ("MMC") even though its equity investment as part of the overall aid package would breach its stated risk management policy. While the proposed equity subscription has no material impact on MC’s financial profile, as the cash outflow is insignificant relative to the company's liquid assets and its robust earnings could absorb potential losses on the investment and its overall exposure to MMC, effective risk management and disciplined investment policies are important rating considerations for the general trading companies. However, this should be offset by its track record of strong operating performance and improved financial profile.
TIS is around 89% owned by the MC group. The company is the largest distributor of commercial vehicles in Thailand and is involved in automobile-related businesses, i.e. car assembly, die and parts manufacturing, after-sales service, automobile export, transportation and car hire-purchase service, via its subsidiaries and associates. TIS has maintained a leading market position in commercial vehicles in Thailand for 22 consecutive years, with market share of around 40%.
CONTACT: Lertchai Kochareonrattanakul, Tanawat Roongtanapirom, Vincent Milton, Bangkok, Tel: +662 655 4755; Satoru Aoyama, Tokyo, Tel: +81 3 3288 2691.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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