Bangkok--Dec 14--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed the National Long-term rating of ‘AA(tha)’ on DaimlerChrysler (Thailand) Limited’s (“DCT”) THB3.0 billion guaranteed debentures due 2006 and THB2.0bn guaranteed debentures due 2007. The Outlook on the ratings is Stable.
The ratings are based entirely on the full, irrevocable and unconditional guarantee on the debentures by DaimlerChrysler AG (“DCX”, rated ‘BBB+’/ Stable Outlook). The International ‘BBB+’ rating for DCX is currently two notches below Thailand’s Long-term local currency rating of ‘A’ with Outlook Stable. Therefore, the guaranteed debentures are rated two notches below Thailand’s National ‘AAA(tha)’ rating. Fitch says that any changes in the International rating differential between DCX and the Thai sovereign will affect the debentures’ National rating. Investors should note that a one notch change in DCX’s International rating could result in greater than one notch change in the debentures’ National rating.
The rating of the guarantor, DCX, reflects the group’s leading position as a manufacturer in the premium segment of the global automotive market and the commercial vehicle market, as well as the credit profile of the Chrysler Group (“CG”). DCX is the world’s fifth-largest automotive manufacturer, supplying both the premium and volume segments, and is also the world’s largest manufacturer of commercial vehicles. A historically high profit contribution from the Mercedes Car Group (“MCG”) division and the stable underlying profitability of the financial services division have continued to support the group’s financial profile, although these positive aspects were partly offset by the recent weaker performance of the MCG and competitive pressures at CG. The MCG division has recently faced a number of quality issues, a restructuring and high operating losses at its Smart division, and higher expenses related to new product introductions.
Fitch notes, however, that the financial profile of the group remains strong. Cash surpluses were used to pay down group debt, while exchange rate movements have lowered the book value of the USD-denominated debt. Industrial leverage improved further and reflects DCX’s net cash position. Nevertheless, the agency expects that the quality offensive at Mercedes-Benz and the Smart restructuring as well as potential pricing pressures in North America are likely to affect the group’s cash generation in the short to medium term.
DCT is 99.99%-owned by DCX. DCT is responsible for the import and wholesale functions for Mercedes-Benz vehicles and Chrysler automobiles (after the merger of Daimler-Benz and Chrysler Group in 1998) for distribution in Thailand. Mercedes-Benz is well-recognised in the premium segment in Thailand, with its relatively low after-sales service costs and the high value of its products in the second-hand market. Mercedes-Benz has maintained its leading position in the premium car segment for several decades. In addition, DCT provides hire purchase and leasing services through its 99.99% leasing subsidiary, DaimlerChrysler Leasing (Thailand) Company Limited.
CONTACT: Lertchai Kochareonrattanakul, Vincent Milton, Bangkok, Tel: + 662 655 4755
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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