Moody's rates American Honda Finance notes A1

Moody's Investors Service said it assigned A1 ratings to the $100 million euro medium-term notes due 2018 issued by American Honda Finance Corp.

American Honda is an indirectly, wholly owned subsidiary of Honda Motor Co., Ltd.

The outlook is negative.

This is a drawdown from the company's $11 billion euro medium-term note program, which has a provisional A1 rating.

The credit quality of the bonds is enhanced by the keep-well agreement between Honda and American Honda Finance. Based on the agreement, Honda must own more than 80% of American Honda Finance's equity - directly or indirectly - while American Honda must maintain positive tangible net assets and ample liquidity, the agency said.

Because the sales finance business is an important marketing driver for car makers in the U.S. market, Moody's said it believes American Honda Finance plays a key role in Honda's strategy for its U.S. auto business.

The ratings are supported by the company's excellent brand and strong position in its core automotive markets, strong position in the motorcycle business, cost management capability and strong balance sheet, the agency said.

However, the negative outlook reflects the challenges that the company faces in recovering its historically high and stable level of profitability due to growing competition in the automobile industry, Moody's said.

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