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Assigned A- rating to bonds of Itochu Enex | Jul 21, 2010 |
JCR has assigned a A- rating to each series of two series of bonds to be issued shortly by the issuer.
Issuer: Itochu Enex Co., Ltd. (8133)
Issues Amount(bn) Issue Date Due Date Coupon Rating
bonds no.11 Y5 July 29, 2010 July 29, 2013 0.58% A-
bonds no.12 Y5 July 29, 2010 July 29, 2015 0.79% A-
Covenants: Negative Pledge
Bond Administrator: No
<Rationale>
(1) Itochu Enex Co., Ltd. is a large energy trading company and a consolidated subsidiary of Itochu Corporation. The Company is engaged in industrial material business (selling industrial fuels and asphalt), energy trade business (imports/exports of petroleum products, domestic sales, and chartering and navigation of ships), and home-life business (supply of LPG and related products and services to households and corporations) in addition to the core car-life business (selling gasoline and other fuels to service stations and automobile-related services).
(2) The car-life division has been strengthening approaches toward new energies as well as improving its competitive strength of sales network through M&As and enhancement of automobile-related services such as
rent-a-car business using preowned cars facing a situation where domestic demand for the petroleum products has been declining. Its energy trade division, which fell into the red owing to lowered demand for the petroleum products overseas and sharp fall in market for tankers, has increased its earnings by reviewing tanker chartering operations. Home-life division also has increased its earnings stability by allowing it to secure an adequate margin through introduction of gas rate slide system for residential & commercial use despite the continued decline in demand for LPG.
(3) The Company's ordinary income for FY 2009 ended March 31, 2010 dropped 32% to 7 billion yen from a year earlier due to the decreased demand for the petroleum products and their margins and also worsened earnings of energy trade division. Its ordinary income is expected to increase for FY 2010 ending March 31, 2011, supported by the turning into the black of the energy trade division in addition to recovery of quantity sold and margin of the petroleum products.
(4) The Company retains a good financial structure as indicated by its net DER ratio, which was 0.04 times at the end of March 2010. Although it plans an increase in its capital investments in FY 2010, JCR considers that its impact on the financial structure will be limited to a small degree, taking into consideration its cash flow generation capacity.
(5) There is no significant change in the Company's debt service capacity despite a tough business environment, judging from the earnings and financial conditions. JCR incorporates creditworthiness of Itochu Group into the rating for the Company, given the fact that its business is operated in an integrated manner with the Group. The funds to be raised by the bond issuance will be used for repayment of the long-term borrowings and operating fund.
Issuer: Itochu Enex Co., Ltd. (8133)
Issues Amount(bn) Issue Date Due Date Coupon Rating
bonds no.11 Y5 July 29, 2010 July 29, 2013 0.58% A-
bonds no.12 Y5 July 29, 2010 July 29, 2015 0.79% A-
Covenants: Negative Pledge
Bond Administrator: No
<Rationale>
(1) Itochu Enex Co., Ltd. is a large energy trading company and a consolidated subsidiary of Itochu Corporation. The Company is engaged in industrial material business (selling industrial fuels and asphalt), energy trade business (imports/exports of petroleum products, domestic sales, and chartering and navigation of ships), and home-life business (supply of LPG and related products and services to households and corporations) in addition to the core car-life business (selling gasoline and other fuels to service stations and automobile-related services).
(2) The car-life division has been strengthening approaches toward new energies as well as improving its competitive strength of sales network through M&As and enhancement of automobile-related services such as
rent-a-car business using preowned cars facing a situation where domestic demand for the petroleum products has been declining. Its energy trade division, which fell into the red owing to lowered demand for the petroleum products overseas and sharp fall in market for tankers, has increased its earnings by reviewing tanker chartering operations. Home-life division also has increased its earnings stability by allowing it to secure an adequate margin through introduction of gas rate slide system for residential & commercial use despite the continued decline in demand for LPG.
(3) The Company's ordinary income for FY 2009 ended March 31, 2010 dropped 32% to 7 billion yen from a year earlier due to the decreased demand for the petroleum products and their margins and also worsened earnings of energy trade division. Its ordinary income is expected to increase for FY 2010 ending March 31, 2011, supported by the turning into the black of the energy trade division in addition to recovery of quantity sold and margin of the petroleum products.
(4) The Company retains a good financial structure as indicated by its net DER ratio, which was 0.04 times at the end of March 2010. Although it plans an increase in its capital investments in FY 2010, JCR considers that its impact on the financial structure will be limited to a small degree, taking into consideration its cash flow generation capacity.
(5) There is no significant change in the Company's debt service capacity despite a tough business environment, judging from the earnings and financial conditions. JCR incorporates creditworthiness of Itochu Group into the rating for the Company, given the fact that its business is operated in an integrated manner with the Group. The funds to be raised by the bond issuance will be used for repayment of the long-term borrowings and operating fund.
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