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The eBearing News
November 30, 2005
Moody's Targets Koyo for Rating Upgrade
copyright © 2005 eBearing Inc.
Moody's Investor Services Inc. announced it is reviewing Koyo Seiko Co. Ltd. (Japan) for
an upgrade of its long-term debt rating.
Koyo is currently at Baa1, where it was upgraded from Baa3 late in 2004.
• article: Moody's upgrades debt of three Japanese bearing manufacturers
An upgrade from Baa1 would be a major event, moving Koyo from "Minimum Investment Grade" to
"High Quality" and radically changing its access to lower-cost financing and borrowing options. An
upgrade would also boost its stock price, as companies with debt rated "High Quality" are often
added to commercial investment portfolios where "Minimum Investment Grade" are not.
Moody's is one of several services (Standard and Poor's, Fitch, and Duff & Phelps are others)
rating the investment quality of various types of debt. Put simply, Moody's rates corporate debt
quality based on historical information about similarly situated companies and their likelihood of
default. Moody's has 23 levels of long-term corporate bond ratings, running in order from highest
to lowest:
| AAA | | | Highest Rating |
| Aa1 | Aa2 | Aa3 | Very High Quality |
| A1 | A2 | A3 | High Quality |
| Baa1 | Baa2 | Baa3 | Minimum Investment Grade |
| Ba1 | Ba2 | Ba3 | Low Grade |
| B1 | B2 | B3 | Very Speculative |
| Caa1 | Caa2 | Caa3 | Substantial Risk |
| Ca1 | Ca2 | Ca3 | Very Poor Quality |
| C | | | In Default |
The agency said its rating action, "reflects
Moody's view that the merger between Koyo Seiko and Toyoda Machine Works, Ltd.
planned for January 1, 2006, may result in a combined new entity with increased competitiveness and
earning power."
Full details of the Koyo / Toyoda merger were revealed this past August.
• article: Koyo Seiko, Toyoda Machine reveal merger details
Koyo operates two divisions -- bearings and steering -- while
Toyoda Machine Works operating divisions are machine tools and automotive parts, including steering.
The new company will be named JTEKT Corporation. The name JTEKT is formed from a
combination of the "J" of "joint," "joy," and "Japan" and the ancient Greek word "tekton," which
meant one possessing superior technical skills. The final "KT" also can stand for the first initials
of Koyo and Toyoda.
Both Koyo and Toyoda have long and very close ties to Toyota Motor Corp. Toyota owns almost 23% of Koyo
Seiko, and almost 24% of Toyota Machine Works. A deputy director from Toyota Motor Corp. has been
named a managing officer of JTEKT.
Kohshi Yoshida, currently President of Koyo Seiko, will be named President of JTEKT once it is properly
formed and beginning to build operations.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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