Bangkok--Jun 8--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National rating of ‘A+(tha)’ to Primus Leasing Company Limited’s (“Primus”) THB500 million three-year guaranteed notes issued under the company’s medium-term note (“MTN”) programme. At the same time, the agency also affirmed the National ratings of Primus’ guaranteed notes under the previous MTN programmes and the guaranteed bills of exchange at ‘A+(tha)’. Primus is a Thai subsidiary of Ford Motor Credit Corporation (“Ford Credit”) of the US; Ford Credit is also a guarantor of Primus’ debt. The Outlook on Ford Motor (“Ford”) and Ford Credit remains Negative, indicating the likelihood of further downgrades on Primus’ National rating.
Primus’ National rating is based on the full, irrevocable and unconditional guarantee by Ford Credit and the creditworthiness of Primus' parents, Ford and Ford Credit, both of the US, which are rated ‘BBB’ on the international scale with a Negative Outlook. This compares with the Thai sovereign’s International Long-term local currency rating of ‘A’. Fitch says that any further changes in the International rating differential between Ford or Ford Credit and the Thai sovereign will continue to affect Primus’ National rating.
As a financing arm supporting domestic vehicle sales, Primus is strategically important to Ford’s operations in Thailand. Its hire purchase loans grew by 17% in 2004. While the average yield on hire purchase loans has declined owing to increased competition and lower lending rates, margins and profitability remain relatively high. Primus’s asset quality has continued to improve with the delinquency (including write-offs) ratio declining to 0.58% at end-2004 from 0.79% at end-2003 as a result of more conservative credit origination and an improved collection system. Primus’s rapid debt-funded receivables growth has resulted in high leverage ratios, which stood at 19.4x equity as at end-2004. Fitch’s concerns over the company’s high leverage are mitigated by the explicit guarantee of the notes by Ford Credit.
On May 19, 2005, Fitch downgraded the ratings of Ford and Ford Credit to ‘BBB’ with a Negative Outlook from ‘BBB+’. The downgrade of Ford’s and Ford Credit’s ratings reflects the impact of sales declines in key product categories, relentless price and product competition and higher commodity prices on Ford's automotive operating profitability. Despite relatively successful new product offerings, the support provided by healthy F-Series volumes, steady economic growth and solid industry sales volumes, Ford, nevertheless, faces break-even to modestly negative cash flows in the automotive segment. Fitch views the ratings of Ford Credit as highly linked to those of Ford given the close business relationship between the two entities, particularly in light of Ford Credit's focus on supporting Ford vehicles sales. To the extent Ford Credit increases its use of securitisation and other secured fundings, Fitch will focus on the quality and quantity of unencumbered assets relative to unsecured debt in evaluating whether increased securitisation funding introduces structural subordination.
Contact:
Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759;
David Marshall, Hong Kong +852 2263 9963
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such 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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