Tags: Moodys | Toyota | Rating | Downgrade

Moody's Cuts Toyota Rating; Further Downgrade Possible

Tuesday, 28 Jun 2011 07:32 AM

Moody's cut its credit rating on Toyota Motor Corp by one notch on Tuesday and will keep it on review for possible further downgrade, saying it will take time for the automaker to return to stable earnings.

Moody's Investors Service lowered its senior unsecured rating on Toyota to Aa3 from Aa2, due to concerns that increased global competition, the yen's strength and high raw materials costs will pressure the Japanese automaker's profits into the next financial year.

The agency put Toyota on review in April, citing disruptions to the automaker's supply chain from the March 11 earthquake and tsunami and subsequent power cuts.

"Toyota's profit recovery during the period of its financial year to March 2013 will not be as strong as preferred due to its declining market share in various regions, the strong yen (currently 80-85 yen per dollar) and high raw material prices," Moody's said in a statement.

Earlier this month, Toyota forecast a larger-than-expected 35 percent fall in annual profit for the current financial year to March 2012.

The downgrade will raise borrowing fees for Toyota and its subsidiaries, which had nearly 6 trillion yen ($74 billion) in short-term debt and payments for long-term debt as of the end of March, with 1 trillion yen set to be redeemed in bonds in 2011, and 1.5 trillion yen the following year.

The automaker had 3.5 trillion yen in cash and equivalents as of the end of March.

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