Bangkok--Jul 26--Fitch Ratings
Fitch Ratings (Thailand) today downgraded the National rating on Primus Leasing Company Limited’s (“Primus”) guaranteed notes issued under its medium-term note programmes and its guaranteed bills of exchange to ‘A(tha)’ from ‘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 rating action follows Fitch’s downgrade of the international Senior Unsecured ratings of Ford Credit, and parent, Ford Motor Corporation (“Ford”), to ‘BBB-’ (BBB minus) from ‘BBB’. The rating Outlook on 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-’ (BBB minus) 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.
The downgrade of Ford reflects the deteriorating profitability of Ford's North American operations, most recently affected by new pricing initiatives, higher commodity costs and supplier issues. Along with the sharp decline in large and mid-size SUV's during 2005 and cash outflows related to restructuring activities, Fitch expects that cash flow will remain negative through 2005 and potentially into 2006. The Rating Outlook remains Negative given significant revenue pressures from industry product and price competition, and the competitive disadvantage represented by its cost structure.
Fitch remains of the view that Ford and Ford Credit are likely to remain investment grade through 2005, as recent product performance and very healthy liquidity provide Ford with the time and resources to address structural cost issues (including legacy costs). Stabilization of the rating will be reliant on progress Ford is able to make in its cost structure over the near term, given the competitive environment and the expected difficulty in meaningfully improving revenues.
Ford Credit remains a solid contributor to consolidated operating results and supports the rating. Dividends to Ford Motor are expected to offset a portion of the negative cash flows from auto operations resulting in little balance sheet deterioration. Liquidity is expected to be strongly supplemented by proceeds from the expected sale of Hertz.
Fitch says that any change in the international rating differential between guarantors and the Thai sovereign could have an impact on National ratings of MNC guaranteed bonds. As National ratings are by definition a ranking of relative creditworthiness, and in Thailand's case the sovereign is defined to be ‘AAA(tha)’, sovereign and guarantors’ rating actions automatically prompts a review of rating relativities to ensure their continuing accuracy. In addition, investors should note that one notch change in the International rating could result in greater than one notch change in the National ratings.
Contact:
Chaiyapat Paitoon, Vincent Milton, Bangkok
+662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963. End.