S&P: Japan-Based ACOM Co. Ltd. Ratings Raised To 'BBB/A-2', Then Withdrawn At Company's Request
We upgraded ACOM because we adjusted the stand-alone credit profile (SACP, which excludes the likelihood of extraordinary support in case of an emergency) to 'bb' from 'bb-' as a result of revising our assessment of the company's business position upward to moderate from weak. We based this on our view that ACOM's business and revenue are becoming more stable. As is the case with its peers, ACOM's operating revenue plunged from around 2006 because it faced claims for refunds of overcharged interest and tighter regulations based on the amended Money Lending Business Law. But its operating revenues have been recovering for the past three years or so, mainly because the company's balance of unsecured consumer loan receivables has returned to an increase while the impact of the refund claims and tighter regulations on industrywide business conditions has eased. Also, the company is strengthening its guarantee business for consumer loans extended by affiliated banks. Nevertheless, we continued to assess ACOM's risk position as very weak at the time of the upgrade because of a continued possibility that it will need to make additional provisions to handle claims for refunds of overcharged interest. Our assessments of ACOM's capital, leverage, and earnings as strong and both its funding and liquidity as adequate were unchanged at the time of the upgrade because we saw no material changes in other assessment factors determining the SACP.
The long-term counterparty credit rating on ACOM incorporated a three-notch uplift from its SACP based on possible extraordinary support from Mitsubishi UFJ Financial Group Inc. (MUFG). We based this on our assessment that ACOM is a strategically important subsidiary to MUFG under our group rating methodology.
The negative outlook reflected our view that economic risk in Japan is rising and we could revise our anchor for the country's finance company sector downward over the next two years or so--as is the case with Japan's other financial institution sectors. Such a downward revision would have affected our ratings on ACOM as well.