Fitch Ratings Indonesia has published the 'AAA(idn)' rating on PT Hino Finance Indonesia's (HFI) second bond issuance.

The rating is on Rating Watch Negative (RWN), mirroring that on HFI, reflecting uncertainty over the credit profile of HFI's major shareholder, Hino Motors, Co. Ltd., which is a key input into our assessment of HFI's rating.

The bonds consist of:

Series A: IDR366 billion 5.85% bonds with a tenor of 370 days due July 2024; and

Series B: IDR334 billion 6.75% bonds with a tenor of three years due July 2026.

'AAA' National Long-Term Ratings denote the highest rating assigned by the agency in its National Rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country or monetary union.

Key Rating Drivers

HFI's rupiah bonds are rated on a par with its National Long-Term Rating, in line with Fitch's criteria. This is because the instruments represent direct and senior obligations of the company and rank equally with all its other senior obligations.

HFI's National Long-Term Rating is derived from our expectation of extraordinary support from its major shareholder, Hino Motors, due to the business and operational links between the two companies. The rating is linked to our assessment of Hino Motors' credit profile, which in turn benefits from its relationship with Toyota Motor Corporation (A+/Stable), which owns 50.1% of Hino Motors.

The RWN is driven by a recently announced corporate action plan, which could weaken the linkages between Hino Motors and Toyota, and therefore diminish the benefits to Hino Motors from its direct shareholding by Toyota. For more details on HFI's key rating drivers and rating sensitivities, see Fitch Places Hino Finance on Rating Watch Negative, published on 14 June 2023.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade of HFI's National Long-Term Rating would lead to similar action on the bond ratings.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The rating is already at the highest point on our national scale and thus there is no rating upside. Removal of the RWN on HFI's National Long-Term Rating would lead to a corresponding change on the bond ratings.

Date of Relevant Committee

13 June 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

HFI's ratings are based on Fitch's expectation of extraordinary support from its materially stronger shareholder, Hino Motors, in times of need.

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