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Toyota Motor Corporation -- Moody's assigns (P)A1 to Toyota's domestic shelf registration and A1 to senior unsecured sustainability bonds

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Rating Action: Moody's assigns (P)A1 to Toyota's domestic shelf registration and A1 to senior unsecured sustainability bondsGlobal Credit Research - 12 Mar 2021Total JPY 300 billion shelf registration and total of JPY 130 billion senior unsecured bonds ratedTokyo, March 12, 2021 -- Moody's Japan K.K. has assigned a (P)A1 senior unsecured rating to the domestic shelf registration of Toyota Motor Corporation (Issuer Rating A1). At the same time, Moody's has assigned A1 senior unsecured rating to the new JPY denominated sustainability bonds which are takedowns from the shelf registration. The outlook is negative.The specific shelf registration rated is:- JPY 300 billion effective April 14, 2020The specific notes rated are:- JPY 70 billion, Series 26 senior unsecured bonds due 2026- JPY 60 billion, Series 27 senior unsecured bonds due 2031Toyota will use the bond proceeds towards social or green projects.RATINGS RATIONALEToyota's A1 issuer rating considers its industry-leading market position with a wide geographic reach, strong brand recognition across a broad product line, and a well-established hybrid vehicle franchise, which will help it meet carbon emissions requirements in various markets. The rating also considers Toyota's track record of operational rigor that has helped it maintain a higher margin than that of its peers. The company also has a strong balance sheet with substantial liquid assets.At the same time, the ratings also reflect the uncertainty on the evolving competitive landscape, including regulatory changes, investments needed for alternative fuel and autonomous driving technologies, and high competition.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSA rating upgrade is unlikely, because of the near-term impact from the pandemic and the longer-term structural changes facing the auto industry. Nevertheless, the rating could be upgraded if (1) Toyota sustains the automotive segment's EBITA margin above 12% and (2) sustains its debt/EBITDA significantly below 1.0x while maintaining its net cash position.Moody's will consider a downgrade if Toyota's balance sheet and profitability weaken because of a decline in demand, with (1) failure to restore its EBITA margin to the 7%-9% range over the coming two years or (2) if debt/EBITDA is sustained above 2x.The principal methodology used in these ratings was Automobile Manufacturer Industry (Japanese) published in July 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_196366. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Toyota Motor Corporation, headquartered in Toyota City, is Japan's biggest automaker.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Mariko Semetko VP - Senior Credit Officer Corporate Finance Group Moody's Japan K.K. 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