A full list of rating action is at the end of this commentary.
KEY RATING DRIVERS
BAM's ratings are driven by sovereign support. BAM is fully owned by the Financial Institutions Development Fund (FIDF), which is a unit of the Bank of Thailand. BAM was established in 1998 to manage distressed assets arising from a financial crisis, although its policy role has gradually diminished as Thailand's financial sector has recovered. Nonetheless, BAM still plays an important role as the country's largest distressed asset manager, with sound operating performance and consistent profitability. BAM has benefitted from ongoing state support, as evident by regulatory advantages, such as its notes being classified as liquid assets as well as tax exemptions. This supports BAM's funding ability and profitability.
The Negative Outlook reflects FIDF's plan to privatise BAM through a stock-exchange listing. Fitch believes the listing may take place in the near term as the process has been ongoing since 2014. Full details and timelines have not been disclosed, but the privatisation plan continues to progress and suggests the state does not see BAM as a long-term core holding. It is possible that BAM's regulatory advantages will be removed after the listing.
BAM's senior bonds are rated at the same level as its National Long-Term Rating as they represent its unsubordinated and unsecured obligations.
RATING SENSITIVITIES
Changes in shareholding structure are likely to negatively affect BAM's ratings. The extent of the downgrade would depend on BAM's continued linkage with the state and level of ownership. Fitch would rate BAM on a standalone basis if the state's shareholding fell below 50% and BAM's regulatory advantages were removed, as extraordinary support from the government could not be relied upon. This could see BAM's National Long-Term Rating downgraded by multiple notches. The final rating would also depend on Fitch's expectations for BAM's leverage and overall financial profile.
A reversal of the plan to partially privatise BAM and signs of a long-term commitment by the state to maintain its shareholding in BAM and BAM's regulatory advantages would lead to a revision of the Outlook to Stable and a possible re-assessment of the National Long-Term Rating. Delays or signs of increasing uncertainty in the listing timeline beyond Fitch's typical rating horizon could lead to a reassessment of the rating and Outlook.
Any changes to BAM's National Long-Term Rating will have a similar effect on the issue ratings.
The rating actions are as follows:
National Long-Term Rating affirmed at 'AA-(tha)'; Outlook Negative
National Short-Term Rating affirmed at 'F1+(tha)'
National Long-Term Rating on outstanding senior unsecured bonds affirmed at 'AA-(tha)'