(Press release provided by Moody's Investors Service)
TOKYO, Nov 28 - Moody's Investors Service on Thursday assigned a long-term rating of A2 to the 50 billion yen ($408.6 million) debt issue of Honda Finance Co Ltd (Honda Finance).
A Keepwell Agreement with Honda Motor Co Ltd (Honda) , also rated A2, supports the issuance.
Under the terms of the agreement, Honda will maintain its 100 percent ownership of Honda Finance. Honda will further ensure that Honda Finance retains a tangible net worth of at least 10 million yen and that it has sufficient liquidity to repay borrowings under this program.
The rating recognises the importance of Honda Finance to Honda's overall auto-financing strategy.
It considers Honda's position in the auto/motorcycle industries of Japan and North America, its strong R&D and new product development capabilities, its highly efficient production systems and its prudent financial strategy.
Honda Finance provides retail-sales and lease financing for Honda products sold in Japan. Sales financing is becoming increasingly important as a domestic marketing tool for Japan's automakers.
Honda's medium-term plan is to raise its domestic unit sales with the introduction of new models and the strengthening of its auto-financing activities through Honda Finance.
Honda has achieved considerable improvements in its financial position. The company's high cash flow has increased liquidity at hand, making its automotive business debt free. This strong cash flow generation means Honda will retain the capacity for self-funding through the current economic cycle.
However, Moody's believes that competitive pressures against Honda are likely to continue. The outlook for auto demand in the major markets will deteriorate, undermined by weak consumer sentiment.
Honda Finance Co Ltd, headquartered in Tokyo, Japan, is a finance company wholly owned by Honda Motor Co Ltd. Honda Motor Co Ltd, also headquartered in Tokyo, Japan, is a leading automaker and the world's largest manufacturer of motorcycles. ($1=122.36 Yen)