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Toyota Industries Commercial Finance, Inc. -- Moody's says that Toyota Industries Commercial Finance's Prime-1 backed commercial paper rating remains unchanged following the rating action on the parent

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Announcement: Moody's says that Toyota Industries Commercial Finance's Prime-1 backed commercial paper rating remains unchanged following the rating action on the parentGlobal Credit Research - 22 Mar 2021New York, March 22, 2021 -- Moody's Investors Service, ("Moody's") says that Toyota Industries Commercial Finance Inc.'s Prime-1 backed commercial paper rating remains unchanged following the rating action on Toyota Industries Corporation.This announcement follows rating affirmation and the change of outlook to stable on Toyota Industries Corporation (TICO, A2 stable), Toyota Industries Commercial Finance's ultimate parent (see separate press release dated 22 March 2021). The rating alignment is consistent with Moody's Methodology of Captive Finance Subsidiaries of Nonfinancial Corporations and is based on Toyota Industries Commercial Finance's strategic significance to its parent, Moody's expectation that TICO would support Toyota Industries Commercial Finance, if required, as well as the explicit support agreement in place between the two companies.Toyota Industries Commercial Finance's unchanged b1 standalone assessment reflects narrow capital cushion, stronger than expected profitability and weak liquidity. TICF's tangible equity to tangible assets capital cushion was approximately 7% as of 31 December 2020 and Moody's expects it will remain close to that level over the next 12-18 months. TICF's asset base is moderate at approximately $3.8 billion as of 31 December 2020 and consists primarily of financing of material handling equipment. Although TICF has a relatively sizeable lease portfolio (32% of receivable portfolio as of 31 December 2020) and could be a subject to a residual value risk, Moody's believes that Toyota Industries Commercial Finance has been able and will continue to be able to manage this risk effectively. Last year at the onset of the COVID-19 pandemic, Toyota Industries Commercial Finance substantially reduced used machinery inventory, although at moderately lower than expected prices for some, to take advantage of high demand.Additional credit challenges incorporated in the company's b1 standalone assessment include exposure to the parents' sales as well as the refinancing risks stemming from company's high reliance on confidence-sensitive funding, with substantial amount of near-term maturities. Moody's expects that the company will be able to refinance its $500 million revolving facility expiring in August 2021.A rating upgrade is not possible given that Toyota Industries Commercial Finance's backed commercial paper rating is currently rated Prime-1, the highest possible level for a short-term rating.A downgrade of TICO's ratings or Moody's weaker assessment of affiliate support could result in a downgrade of Toyota Industries Commercial Finance's short-term ratings. A material decline in asset quality and profitability beyond Moody's current expectations, diminished liquidity, or leverage (TCE/TMA) to less than 7% could lead to a lower stand-alone assessment for TICO. However, a lower standalone assessment is unlikely to result in a rating downgrade absent a downgrade of the ratings of the parent.Headquartered in Dallas, TX, Toyota Industries Commercial Finance is a wholly-owned US captive finance subsidiary of Toyota Industries Corporation. The company was established in November 2014 and commenced full operations in October 2015. Toyota Industries Commercial Finance provides retail and dealer financing for Toyota Material Handling, Inc.'s lift trucks and Toyota Motor Corporation majority-owned HINO commercial trucks. The company had approximately $3.4 billion in earning assets as of 31 December 2020.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. Inna Bodeck Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Ana Arsov MD - Financial Institutions Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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