Fitch Rates Thai ORIX Leasing's Guaranteed Bonds 'AAA(tha)(EXP)'
The final rating for the upcoming issuance is contingent upon receipt of final documents conforming to information already received and the Office of Securities and Exchange Commission's approval of the bond issuance.
KEY RATING DRIVERS
The ratings on the guaranteed bonds are based entirely on irrevocable and unconditional guarantees provided by Japan-based ORIX Corporation (ORIX; A-/Stable). ORIX's Long-Term Foreign-Currency Issuer Default Rating (LT FC IDR) of 'A-' is higher than Thailand's Long-Term Local-Currency IDR (LT LC IDR) of 'BBB+', and hence correlated to 'AAA(tha)', the highest rating on the national scale.
The rating on ORIX reflects its diversified business model, modest leverage, and solid track record of profitability that are underpinned by sound risk management. The rating also factors in risks embedded in its strategic investments, and profit volatility risks from capital gains or losses on its principal investments (reflecting its tendency to seek inorganic growth, where available, including investing across sectors and geographies). ORIX is primarily wholesale-funded which, like other non-bank entities, entails refinancing risks.
TOLC provides a wide range of leasing products, including finance leases, auto operating leases, hire purchase and rentals of equipment and machines. TOLC has been benefiting from financial and operational supports from its parent, ORIX, including loans and debts guaranteed and technical supports. TOLC's assets stood at THB18.9bn at end-March 2016 (FYE16) or 0.5% of ORIX's total assets.
TOLC was established in 2010 following the amalgamation of two local subsidiaries of ORIX - Thai Orix Leasing Company Limited (founded 1978) and ORIX Auto Leasing Company Limited (founded 2001). Following the amalgamation, ORIX became the largest shareholder with a stake of 96.6% with Bangkok Insurance Public Company Limited holding the remaining 3.4%.
For more information on ORIX, please refer to the credit report dated 30 August 2016 and to the rating action commentary entitled, "Fitch Affirms ORIX's Rating at 'A-'; Outlook Stable", dated 10 August 2016, available at www. fitchratings. com.
The ratings of TOLC's guaranteed bonds are the highest on the national scale; hence, no rating upside is possible. A downgrade could be triggered if ORIX's LT FC IDR is lower than Thailand's LT LC IDR, either through a downgrade of ORIX's rating or an upgrade of Thailand's rating. However, this is unlikely to occur in the near term as reflected in their Stable Outlooks.