TEXT-S&P: Mitsubishi Corp. euro MTN program affirmed at 'A+/A-1'

Mon Nov 19, 2012 3:23am EST

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(The following statement was released by the rating agency)

Nov 19 - Standard & Poor's Ratings Services today affirmed its 'A+' long-term program rating and 'A-1' short-term rating on the up to US$5 billion euro medium-term note (MTN) program jointly established by Mitsubishi Corp. (A+/Stable/A-1) and its two overseas subsidiaries. The affirmation is in response to a recent update to the MTN program, under which MC Finance & Consulting Asia Pte. Ltd. (MCFC; not rated), Mitsubishi Corp.'s wholly owned subsidiary in Singapore, was added as an issuer.

The notes issued from this program are senior unsecured bonds, which are issued by one of Mitsubishi Corp., Mitsubishi Corp. Finance PLC (MCF; A+/Stable/A-1), or MC Finance & Consulting Asia (MCFC). Those notes issued by MCF and MC Finance & Consulting Asia (MCFC) are guaranteed by Mitsubishi Corp. Market-linked notes, such as index-linked notes, may be issued from the program. Under Standard & Poor's rating criteria, we do not rate the bonds if principal payments of the bonds to be issued are linked to fluctuations in equity or commodity prices, or those in equity or commodity index prices. Conversely, we may rate the bonds if only interest payments are linked to prices of equity or commodities. In this case, the ratings will be at the same level as those on issuers or guarantors. In addition, credit-linked notes, which may be issued from this program, are not covered in the rating on this program, because the ratings on credit-linked notes may be different from those assigned to senior unsecured notes.

Japan's largest trading company, Mitsubishi, is strong in both resource and nonresource businesses. The company is particularly strong in the coking coal, energy, automobile, and food businesses. Thanks to its diversified earnings sources, which are backed by a wide range of businesses developed in Japan and overseas, Mitsubishi has maintained high profitability for years. Mitsubishi has been active in acquiring companies and businesses, as well as resource projects. It holds a large amount of less-liquid assets with highly fluctuating cash flow. Although Mitsubishi's risk appetite is high like other major traders, Standard & Poor's believes that the company maintains an adequate balance between capital and earnings relative to risk assets through adequate risk management. Its net debt-to-equity ratio (net debt/capitalization) remained at a sound level of about 1.1x as of March 31, 2012. Due to its sizable overseas projects, we view Mitsubishi's funding capabilities, including foreign currencies funding, as well as liquidity management capabilities as extremely important factors in our credit analysis. Standard & Poor's believes that the company's liquidity is managed adequately, given its stable access to domestic and overseas capital markets and favorable relationships with financial institutions, including its main banks.

RELATED CRITERIA AND RESEARCH

Principles Of Credit Ratings, Feb. 16, 2011

2008 Corporate Criteria: Analytical Methodology, April 15, 2008

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