TIDM15KD
RNS Number : 6185N
Toyota Credit Canada Inc
21 May 2020
Ratings Action
On 20 May 2020, S&P Global Ratings, acting through S&P
Global Ratings Japan Inc. ("Standard & Poor's Japan")
downgraded to A+ from AA- the long-term issuer and issue credit
ratings of Toyota Motor Corporation and its subsidiaries, including
Toyota Motor Credit Corporation, Toyota Motor Finance (Netherlands)
B.V., Toyota Credit Canada Inc. and Toyota Finance Australia
Limited. Standard & Poor's Japan removed all its long- and
short-term credit ratings on Toyota Motor Corporation and its
subsidiaries, including Toyota Motor Credit Corporation, Toyota
Motor Finance (Netherlands) B.V., Toyota Credit Canada Inc. and
Toyota Finance Australia Limited from CreditWatch. The outlook on
the long-term issuer credit ratings is negative.
Publication of Form 8-K - Toyota Motor Credit Corporation
Toyota Motor Credit Corporation ("TMCC") has published its
Current Report on Form 8-K ("Form 8-K") which it has filed with the
Securities and Exchange Commission on 19 May 2020, announcing that
f or the benefit of its investors, TMCC is filing certain
preliminary unaudited financial data for the quarter and fiscal
year ended 31 March 2020.
For the quarter ended 31 March 2020, TMCC expects to report a
consolidated net loss of approximately $86 million, compared to net
income of $295 million for the same period in fiscal 2019. The
decrease in net income was primarily due to an increase in
provision for credit losses of $220 million and an increase in
depreciation expense on operating leases of $136 million mainly
driven by the impacts of the coronavirus ("COVID-19") pandemic.
TMCC expects to report an allowance for credit loss of $817 million
as of 31 March 2020 and depreciation expense on operating leases of
$1.9 billion for the quarter ended 31 March 2020. Beginning in the
second half of March 2020 and continuing in April 2020, sales of
Toyota and Lexus vehicles have declined significantly as a result
of the COVID-19 pandemic. Consistent with the decline in Toyota and
Lexus vehicle sales, TMCC experienced significant declines of
approximately 56% in financing volume and 59% in the number of
insurance agreement issuances for April 2020 compared to April
2019. These trends are continuing to a lesser degree through May
2020, however, TMCC expects that they will continue to have an
adverse effect on its results of operations. From 13 March 2020
through 15 May 2020, TMCC granted payment extensions and deferrals
for retail and lease customers who requested payment relief to
approximately 12% of our retail customers and 10% of our lease
customers. For comparison, from 9 January 2020 through 12 March
2020, TMCC had granted payment extensions and deferrals for retail
and lease customers who requested payment relief to approximately
1% of our retail customers and 0.4% of our lease customers.
For the fiscal year ended 31 March 2020, TMCC expects to report
consolidated net income of approximately $913 million, compared to
consolidated net income of $795 million for the fiscal year ended
31 March 2019. As of 31 March 2020, TMCC expects to report an
allowance for credit losses as a percentage of gross earning assets
of 0.73% and net charge-offs as a percentage of average gross
earning assets of 0.34%. As of 31 March 2020, TMCC expects to
report aggregate balances for accounts 60 or more days past due as
a percentage of gross earning assets of 0.39%, with finance
receivables and operating leases having 0.41% and 0.34% of
aggregate balances for accounts 60 or more days past due,
respectively. Accounts with payment extensions and deferrals under
our COVID-19 relief programs are not considered past due. TMCC also
expects to report that its financing volume increased 8% and its
insurance agreements volume increased 5% for fiscal 2020 compared
to fiscal 2019.
For liquidity purposes, TMCC holds cash in excess of its
immediate funding needs. For the fiscal year ended 31 March 2020,
TMCC expects to report excess funds ranging from $2.4 billion to
$8.8 billion with an average balance of $5.4 billion during fiscal
2020. Excess funds include cash, cash equivalents and investments
in short-term, highly liquid and investment grade money market
instruments as well as certain available-for-sale debt
securities.
As of 31 March 2020, TMCC expects to report total debt of $97.7
billion. Subsequent to its fiscal year end, TMCC has raised an
additional $10.5 billion through the public secured and unsecured
capital markets and private term loan and asset-backed
securitization credit markets, excluding commercial paper
issuances. While we believe our ability to access the capital
markets remains largely intact, our funding spreads have increased
across both short-term and long-term markets and our long-term
credit ratings have been downgraded or put on negative outlook and
may be subject in the future to further actions or downgrades by
credit ratings agencies. As of 15 May 2020, TMCC maintained excess
funds of approximately $18.1 billion. As of 15 May 2020, TMCC and
its co-borrowers had $15.7 billion in committed, undrawn bank
credit facilities and TMCC had an additional $4.1 billion in
stand-alone committed, undrawn bank credit facilities.
The above should be read in conjunction with the financial
statements and management's discussion and analysis included in
TMCC's filings with the Securities and Exchange Commission ("SEC"),
as well as the matters discussed under "Risk Factors" in TMCC's
Form 10-K for the fiscal year ended 31 March 2019 as updated by
TMCC's filings with the SEC.
The preliminary financial data above has been prepared by, and
is the responsibility of, TMCC's management, based upon information
available to it as of 19 May 2020, and has not been prepared with a
view toward compliance with published guidelines of the SEC for the
preparation or presentation of financial information.
PricewaterhouseCoopers LLP has not audited, reviewed, compiled, or
applied agreed-upon procedures with respect to the preliminary
financial data. Accordingly, PricewaterhouseCoopers LLP does not
express an opinion or any other form of assurance with respect
thereto. TMCC has not yet completed its financial and operating
closing procedures as of and for the year ended 31 March 2020.
Additionally, the preliminary financial data above has not been
subject to audit, review or other procedures by TMCC's independent
registered public accounting firm. As a result, actual results may
differ materially from the preliminary results shown above and will
not be publicly available until TMCC reports its fourth quarter and
full year fiscal 2020 results.
Supplemental Risk Factor
In light of recent developments relating to the COVID-19
pandemic, TMCC is supplementing Item 1A. Risk Factors of its Annual
Report on Form 10-K for the year ended March 31, 2019 (the "Annual
Report on Form 10-K"). The following risk factor should be read in
conjunction with the risk factors described in the Annual Report on
Form 10-K.
"We face various risks related to health epidemics and other
outbreaks, which have had and are expected to continue to have
material adverse effects on our business, financial condition,
results of operations and cash flows.
We face various risks related to health epidemics and other
outbreaks, including the global outbreak of coronavirus
("COVID-19"). The COVID-19 pandemic, changes in consumer behavior
related to illness, pandemic fears and market downturns, and
restrictions intended to slow the spread of COVID-19, including
quarantines, government-mandated actions, stay-at-home orders and
other restrictions, have led to disruption and volatility in the
global capital markets, which has increased our cost of capital and
adversely affected our ability to access the capital markets.
In addition, the COVID-19 pandemic and restrictions intended to
slow the spread of COVID-19 have adversely affected our business,
and the business of our affiliate, Toyota Motor North America, Inc.
("TMNA"), and our ultimate parent, Toyota Motor Corporation
("TMC"), in a number of ways. Similar to relief options we offer to
customers and dealers impacted by natural disasters such as
hurricanes, floods, tornadoes and wildfires, we are offering
payment relief options to customers and dealers impacted by
COVID-19, including finance contract extensions, lease deferred
payments, temporary interest deferrals for dealer floorplan
financing, and principal payment deferral options for dealer real
estate and working capital loans, and temporarily suspended
outbound collection activities in states with state-wide
stay-at-home orders and repossession activities nationwide for a
period of time, but have since resumed outbound collection
activities in nearly all states (collectively, the "COVID-19
Relief"). Our payment relief programs currently allow existing
customers who request assistance to defer their loan or lease
payments for up to 120 days and waive certain fees, but with
interest continuing to accrue. Unlike the relief options offered
for natural disasters, which were limited to the affected
geographies, the COVID-19 Relief is being offered nationwide due to
the global impact of the COVID-19 pandemic, and may not be
successful in reducing future increases to our provisions for
credit losses. The COVID-19 pandemic has increased our residual
value losses, and has adversely affected our business, financial
condition, results of operations, and cash flows and may continue
to do so if there is not a substantial economic recovery. We have
also temporarily transitioned nearly all of our team members to
remote work arrangements, and many Toyota and Lexus dealerships
have temporarily closed and more may voluntarily close, or be
mandated to close, in the near future. TMNA temporarily suspended
production at all of its automobile and components plants in North
America from March 23, 2020 through May 8, 2020 and TMC has
temporarily suspended production at selected plants in countries
outside of North America. Although TMNA and many of its suppliers
are resuming production, unexpected
delays affecting the supply chain or logistics network, could
negatively impact dealer inventory levels, vehicle sales, the sale
of our financing and insurance products, dealer profitability and
creditworthiness, and our future results of operations.
These events have disrupted the supply chains of the vehicles we
finance and have had a material adverse effect on the sale of
vehicles and our financing and insurance products. These events
have also caused an unprecedented level of unemployment claims,
resulted in a significant decline in consumer confidence and
spending, and a sharp decline in economic conditions. In addition,
these events have caused a significant decline in used vehicle
prices and a significant increase in delinquencies and may cause an
increase in dealer defaults, which have resulted in materially
increased provisions for credit losses and residual value losses,
which may continue if there is not a substantial economic recovery.
The foregoing events, and the uncertainty relating thereto, have
also adversely affected our credit rating and may result in further
actions or downgrades by credit ratings agencies. For more
information regarding impacts of credit rating changes on TMCC,
please see "Our borrowing costs and access to the unsecured debt
capital markets depend significantly on the credit ratings of TMCC
and its parent companies and our credit support arrangements" under
Item 1A. Risk Factors in our Annual Report on Form 10-K.
If significant portions of our workforce are unable to work
effectively as a result of the COVID-19 pandemic, including because
of illness, quarantines, facility closures, ineffective remote work
arrangements or technology failures or limitations, our operations
would be adversely impacted. Certain of our third-party suppliers
and business partners that we rely on to deliver our products and
services and to operate our business have informed us that they
will be unable to perform fully, and we may receive similar
notifications from other suppliers and business partners in the
near future, which could adversely impact our ability to operate
our business and increase our costs and expenses. These increased
costs and expenses may not be fully recoverable or adequately
covered by insurance. We are working with our stakeholders
(including customers, dealers, team members, suppliers and business
partners) to assess the ongoing impact of the COVID-19 pandemic and
to take actions in an effort to mitigate adverse consequences. The
duration of the COVID-19 pandemic is uncertain, and the foregoing
impacts and other unforeseen impacts not referenced herein, as well
as the ultimate impact of the COVID-19 pandemic, are difficult to
predict and have had and are expected to have a material adverse
effect on our business, financial condition, results of operations
and cash flows."
See also "General business, economic, and geopolitical
conditions, as well as other market events, may adversely affect
our business, results of operations and financial condition", "Our
results of operations and financial condition are substantially
dependent upon the sale of Toyota and Lexus vehicles, as well as
our ability to offer competitive financing and insurance products",
"We are exposed to customer and dealer credit risk, which could
negatively affect our results of operations and financial
condition", "A failure or interruption in our operations could
adversely affect our results of operations and financial
condition", and "The failure or commercial soundness of our
counterparties and other financial institutions may have an effect
on our liquidity, results of operations or financial condition"
under Item 1A. Risk Factors in TMCC's Annual Report on Form
10-K.
Forward-looking Statements
All statements above that do not directly and exclusively relate
to historical facts constitute "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. These statements are based on TMCC's current expectations and
currently available information. Actual results and events in
future periods may differ materially from these expectations due to
certain risks, uncertainties and other important factors,
including, among others, the risk factor regarding health epidemics
and outbreaks set forth above, which describes the highly uncertain
impact the COVID-19 pandemic will, or may, have on TMCC's business,
financial condition, results of operations and cash flows, and the
risk factors set forth in the most recent annual and periodic
reports of TMCC. TMCC does not undertake to update the
forward-looking statements to reflect actual results or changes in
the factors affecting the forward-looking statements.
To view the Form 8-K, please paste the URL below into the
address bar of your browser.
http://www.rns-pdf.londonstockexchange.com/rns/6185N_1-2020-5-21.pdf
A copy of the Form 8-K will be submitted to the National Storage
Mechanism and will be available shortly at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
DOCFIFSTELILFII
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