RAM Ratings has reaffirmed the respective AAA(s)/Stable/P1(s) and P1(s) ratings of Toyota Capital Malaysia Sdn Bhd's (the Company) Conventional and Islamic CP/MTN Programme with a combined limit of up to RM2.5 billion in nominal value and RM600 million CP Programme. 

The enhanced ratings of Toyota Capital's CP and MTN programmes reflect the credit strength of the irrevocable and unconditional guarantee extended by Toyota Motor Finance (Netherlands) BV (Toyota Netherlands), a fully owned subsidiary of Toyota Financial Services Corporation. Toyota Netherlands has a credit-support agreement with Toyota Financial Services Corporation, which in turn has a similar contract with Toyota Motor Corporation (TMC or the Group). As such, the ultimate support from TMC enhances the credit profiles of the debt facilities beyond Toyota Capital's stand-alone credit strength. 

Notably, TMC's strong business profile is underscored by its position as one of the world's leading automotive vehicle manufacturers, with a product range that encompasses the premium and mass-market segments. Excluding financial services debts, the Group's funds from operations debt cover ratio had improved to 2.24 times as at end-March 2016 (end-March 2015: 2.02 times).  Toyota was also in a net-cash position as at the same date. Nonetheless, these strengths are moderated by the keenly competitive global auto industry and the Group's vulnerability to currency fluctuations. 

Ultimately owned by TMC, Toyota Capital is a captive financier of primarily Toyota vehicles in Malaysia. Its goal is to complement and support the sale of Toyota vehicles in this country. On this front, we expect the Company to continue enjoying strong operational support and financial flexibility from its ultimate parent. 

Toyota Capital's overall asset quality is still sound and better than that of its leasing peers, although its gross impaired financing ratio had edged up to 1.0% as at end-September 2016 (end-March 2015: 0.7%). To address the deteriorating asset quality, the Company has been actively offering restructuring and rescheduling options to all its borrowers since early 2015, with the aim of providing some relief to borrowers in tight financial situations.  Profitability wise, we expect it to remain subdued in FY Mar 2017 amid its deteriorating asset quality and continued margin compression. As at end-September 2016, Toyota Capital's adjusted net gearing ratio of 11.2 times (end-March 2016: 11.9 times) remained higher than those of its leasing peers. 



Analytical contact                                           Media contact
Chew Wei Li                                                  Padthma Subbiah
(603) 7628 1025                                              (603) 7628 1162 
[email protected]                                             [email protected]



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