Global credit appraiser, Moody's Investors Service has put Hyundai Capital's corporate credit rating on the downward revision list.
Moody's Investors Service said on March 27 that it will maintain Hyundai Capital's long-term foreign currency-denominated corporate credit rating of "Baa1," but has begun reviewing the downgrade. The outlook for Hyundai Capital before the downward revision review was "negative."
Moody's pointed out that Hyundai Capital is South Korea's largest auto financing company by assets and is vulnerable to weakening auto sales performance by Hyundai Motor.
The downward revision review is based on its review of the downgrade of the credit ratings of Hyundai Capital's parent companies Hyundai Motor and Kia Motors, Moody's said, adding that it reflects the judgment that Hyundai Motor's ability to provide support to Hyundai Capital may weaken given the difficulties facing Hyundai Motor amid slow global demand for new cars in the coming months.
"Korea's credit finance companies and auto industry are affected by the impact of demand due to widespread social distance campaign and reduced domestic consumption," it said. "The worsening business environment and increased volatility in market conditions could potentially put pressure on Hyundai Capital's profitability, asset soundness and liquidity."
Moody's expected global demand for cars to fall about 14 percent this year. In the case of big three Japanese auto companies, their credit ratings were downgraded altogether. Moody's downgraded Toyota's credit rating from "Aa3" to "A1," while pulling down Honda’s rating from "A2" to "A3," and Nissan’s from 'Baa1' to 'Baa3'.
"The overall global auto market has been depressed and the credit ratings of companies such as Nissan and Toyota have been downgraded one after another," an industry source said. "We have to wait and see since Hyundai Capital is in the process of reviewing the downward revision."