Blog: Honda Finance Co., Ltd. — Moody’s assigns (P)A3 to Honda Finance’s shelf registration – Yahoo Finance

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Rating Action: Moody’s assigns (P)A3 to Honda Finance’s shelf registrationGlobal Credit Research – 30 Apr 2021Total shelf registration amount is JPY 400 billionTokyo, April 30, 2021 — Moody’s Japan K.K. has assigned a backed senior unsecured (P)A3 rating to the domestic shelf registration of Honda Finance Co., Ltd. (Honda Finance), which is a subsidiary of Honda Motor Co., Ltd. (Honda, Issuer Rating A3, stable). The rating outlook is stable.The specific shelf registration rated is:** JPY 400 billion, expected effective date of May 16, 2021RATINGS RATIONALEHonda Finance’s backed senior unsecured (P)A3 rating reflects its baa3 standalone assessment as well as the implicit and explicit support from Honda resulting in three notches of affiliate support incorporated in its long-term rating. Moody’s assessment of Honda’s implicit support is based on Honda Finance’s important business and economic function in supporting the sale of vehicles manufactured by its parent in Japan. The importance of Honda Finance to Honda is demonstrated through a keepwell agreement, although it does not guarantee timeliness of full payment of Honda Finance’s obligations by Honda.Honda Finance’s baa3 standalone assessment reflects its strong asset quality, backed by low nonperforming loan (NPL) and low residual value risk; healthy capital buffer; and high dependence on wholesale funding, mitigated by low reliance on secured funding. As a monoline captive finance company, Honda Finance’s financial performance will be strongly influenced by developments affecting the parent. Honda Finance’s credit challenges include relationship with parent exposing its performance to parent company trends, short funding duration exacerbating funding vulnerability associated with its high reliance on wholesale funding and uncertain operating environment because of the coronavirus pandemic may result in higher credit losses and residual value declines.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGAn upgrade of Honda’s ratings would lead to an upgrade of Honda Finance’s ratings, provided that Honda Finance maintains a stable financial profile and that Moody’s assumptions of affiliate support do not weaken.Honda Finance’s ratings could be downgraded if Honda’s ratings are downgraded. A downward adjustment of Honda Finance’s standalone assessment without change in the parent’s support assumptions will not have an impact on Honda Finance’s final ratings.The methodologies used in this rating was Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese) published in August 2019 and available at https://ift.tt/3bSE5XJ, and Finance Companies Methodology (Japanese) published in November 2019 and available at https://ift.tt/38NvtzC. Alternatively, please see the Rating Methodologies page on http://www.moodys.com for a copy of these methodologies. Honda Finance Co., Ltd., headquartered in Tokyo, is a wholly owned subsidiary of Honda Motor Co., Ltd. The company had JPY1.2 trillion of total assets as of 30 September 2020.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://ift.tt/3r4KzHE ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on http://www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ift.tt/349xDIr disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ift.tt/3aPfqCt Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on http://www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on http://www.moodys.com.Please see http://www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on http://www.moodys.com for additional regulatory disclosures for each credit rating. Shunsaku Sato VP – Senior Credit Officer Financial Institutions Group Moody’s Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4110 Client Service: 81 3 5408 4100 Graeme Knowd MD – Banking Financial Institutions Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody’s Japan K.K. Atago Green Hills Mori Tower 20fl 2-5-1 Atago, Minato-ku Tokyo 105-6220 Japan JOURNALISTS: 81 3 5408 4110 Client Service: 81 3 5408 4100 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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