The Korea Herald reports that two major credit agencies have assigned below investment-grade ratings to Hyundai Motor Co.’s proposed seven-year senior guaranteed notes on par with the ratings for the company. However, the newspaper said they had optimistic outlooks for the manufacturer.
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Moody’s Investors Service assigned a “Ba1” rating to the manufacturer’s debt, which will be issued by the U.S. subsidiary Hyundai Motor Manufacturing Alabama. Meanwhile Standard & Poor’s Ratings Services gave the company a “BB+” rating. Both are one notch below what is considered investment-grade.
Moody’s cited the foreign-exchange risks faced by Hyundai Motor in its exports, the growing contingent liability related to its extended warranty program, and most importantly concerns over the company’s consumer finance businesses, the Herald said.
“However we believe that problems in this (credit-card) area are manageable, given the company’s improving equity base and cash position, as well as its strong flow generation capabilities,” Moody’s added in its statement.
The credit rating agency also noted that its rating was supported by significant sales growth at Hyundai Motor over the past few years, and its “highly attractive” warranty program in the United States.
Moody’s had previously rated Hyundai Motor as “Ba1.”
In a statement released yesterday S&P said the constraint on its rating is justified by the possibility the company will have to provide further support to its credit-card subsidiaries, adding that the company will also face increased competition in the vital U.S. market.
S&P, which rated the company as “BB+” with a “positive” outlook, noted that Hyundai was likely to improve in its credit quality over the next few years if it can expand abroad while limiting its dependence on the domestic market.
“Achieving this goal is likely to hinge on Hyundai’s ability to further improve its product quality and brand image,” S&P said.
