TEXT-S&P affirms Hyundai Capital America 'BBB+' rating
Sept 24 - Overview -- Hyundai Capital America (HCA), a "core" subsidiary of Hyundai Motor Co. (HMC), has announced that it will sell a benchmark-sized offering of senior unsecured notes. -- We are affirming the 'BBB+' issuer credit rating on HCA, the same as the issuer credit rating on its parent, and we're assigning a 'BBB+' rating on the proposed notes. -- The outlook on the issuer credit rating is stable, reflecting its "core" subsidiary status and the stable outlook on the ratings on HMC and its affiliate, Kia. Rating Action On Sept. 24, 2012, Standard & Poor's Ratings Services affirmed its 'BBB+' long-term issuer credit rating on Hyundai Capital America (HCA). The outlook remains stable. At the same time, we assigned our 'BBB+' rating on the company's proposed benchmark-sized senior unsecured notes. Rationale HCA has announced that it plans to sell a benchmarked-sized offering of senior unsecured notes with maturities of three and five years. We rate the notes 'BBB+', the same as our issuer credit rating on the company. The note offering does not affect the issuer rating on HCA, which mainly reflects our assessment that HCA is a "core" subsidiary of Hyundai Motor Co. (HMC). We view HCA as a core subsidiary under our group rating methodology because of the high unlikelihood it would be sold, the integral role the company plays in HMC's current identity and future strategy, the close business ties between the two entities, and HCA's successful operating history. We consider HCA a captive finance unit of HMC. We rate captive finance units organized as separate subsidiaries the same as their parents in most cases. Outlook The stable rating outlook on HCA reflects its core subsidiary status and the stable rating outlook on HMC and its affiliate, Kia. We could change our assessment of HCA's core status and most likely lower the rating if the company begins originating non-Hyundai/Kia loans and leases in a volume that leads us to reassess its status as a captive finance unit. We expect HMC and Kia will maintain their market positions and profitability despite increasing competition in the global auto industry. Also, their solid financial risk profiles and strong liquidity will likely enable the companies to weather any negative developments. Given that our ratings on HMC and Kia are the same, we may lower our ratings on the two companies if HMC's adjusted debt to EBITDA exceeds 1.5x for a prolonged period. In addition to a significant erosion of HMC's profitability or its global market position, negative rating factors include major additional investments as a result of weak corporate governance and deterioration in operating efficiency because of lack of stability in labor relations. Although the potential to upgrade HMC and Kia is limited in the next year, we could raise the ratings on the companies if they both improve their profitability by further enhancing their brands and global market positions without significant deterioration in their sound financial risk profiles. We would also need to consider whether HMC had improved its corporate governance or streamlined its circular and complex ownership structure. Related Criteria And Research Captive Finance Operations, April 17, 2007 Ratings List Ratings Affirmed Hyundai Capital America Issuer Credit Rating BBB+/Stable/-- New Rating Hyundai Capital America Senior Unsecured BBB+ Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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