Fitch Places Bangkok Commercial Asset Management on RWN After IPO Approval

Stocks and Financial Services Press Releases Friday November 29, 2019 13:46
Bangkok--29 Nov--Fitch Ratings

Fitch Ratings has placed Bangkok Commercial Asset Management Public Company Limited's (BAM) National Long-Term Rating of 'AA-(tha)', National Short-Term Rating of 'F1+(tha)' and National Long-Term Rating on its senior unsecured debt of 'AA-(tha)' on Rating Watch Negative (RWN). This follows an announcement that BAM's IPO and timeline received the approval of Thai authorities on 21 November 2019.

KEY RATING DRIVERS

The RWN reflects a potential rating downgrade as the government's propensity to provide support to BAM is likely to be reduced after the IPO. The stock-market listing plan indicates that the Financial Institutions Development Fund, a unit of the Bank of Thailand, may cut its stake in BAM to below 50% from 99.99% after the IPO. The level of state linkages with and control over BAM may also decline.

BAM's ratings are driven by sovereign support. The company was established in 1998 to manage distressed assets arising from the 1997 financial crisis, although its policy role has gradually diminished as Thailand's financial sector has recovered. Moreover, the privatisation plan suggests the state does not see BAM as a long-term core holding. Nonetheless, BAM has an important role as the country's largest distressed-asset manager, with consistent profitability. BAM has benefitted from ongoing state support, evident from its regulatory advantages, such as its notes being classified as liquid assets as well as tax exemptions. This supports BAM's funding ability and profitability.

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
Fitch expects to resolve the RWN after the completion of the IPO and our reassessment of the government's propensity to support as well as BAM's standalone credit profile.

BAM's rating is sensitive to the changes in the shareholding structure. The extent of the downgrade would depend on BAM's continued linkage with the state and the level of ownership. Even if the state shareholding were to fall below 50%, Fitch may consider that there is a possibility of extraordinary support if there were ongoing benefits arising from government control and/or a continued policy role, which would support a higher rating than a standalone outcome. Fitch would rate BAM on a standalone basis if the state's shareholding were to fall below 50%, state linkages were limited, and extraordinary support from the government could not be relied upon. This could result in a downgrade of BAM's National Long-Term Rating to the 'BBB(tha)' category or lower if the adverse impact on profitability and funding costs from the removal of regulatory advantages were to be more material on the stability of the business model.

Any changes to BAM's National Long-Term Rating will have a similar effect on the issue ratings.
Additional information is available on www.fitchratings.com

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