Moody's rates new Hyundai notes Ba1

Moody's Investors Service said it has assigned a Ba1 rating to the senior guaranteed notes due 2010 to be issued by Hyundai Motor Manufacturing Alabama LLC under Rule 144A, and unconditionally and irrevocably guaranteed by Hyundai Motor Co.

Moody's said the rating reflects Hyundai Motor Co.'s established market position in Korea, its growing global presence - particularly in North America - continuing solid operating performance, improving debt coverage measures, and the positive earnings impact of its stronger model mix.

The rating further considers the foreign exchange risks associated with the company's high level of vehicle exports, the growing contingent liability related to its extended warranty program, and Moody's concerns over the company's consumer finance business, which is conducted through subsidiaries.

At the same time, the issue of contingent liability can be double-edged in its implications in that its growth - as currently in the United States - is indicative of higher sales.

Over the past several years, HMC has posted significant sales growth, supported by strong demand in Korea and improvements in the quality and branding for "Hyundai" cars, especially in the United States. Further support derives from Hyundai Motor Co.'s highly attractive warranty programs in North America, the ratings agency said.

Moody's said that while Hyundai Motor Co. will continue to face operating challenges that may affect its operating performance - such as unpredictable foreign exchange rates and potential hikes in warranty costs - Moody's said it believes the company can maintain its solid operating performance and cash flow-generation capabilities in the intermediate term.

Moody's said it does have concerns over Hyundai Motor Co.'s consumer finance subsidiaries. However, the agency said it believes that problems in this area are manageable, given the company's improving equity base and cash position, as well as its strong cash flow-generation capabilities.

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