Fitch assigns AA- to BAM’s upcoming unsecured notes
Fitch Ratings (Thailand) has assigned Bangkok Commercial Asset Management Plc (BAM) AA- (tha)/negative) a rating of AA- (tha) for its upcoming senior unsecured notes of up to 8.0 billion baht.
The notes will be issued in tranches with maturities of up to 10 years. The issuer has an option to redeem the notes after five years. Proceeds of the issue will be used for general corporate purposes and refinancing.
The notes are rated at the same level as BAM’s national long-term rating as they represent its unsubordinated and unsecured obligations.
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. Ongoing state support is evident through regulatory advantages, such as BAM’s notes being classified as banks’ liquid assets, and tax exemptions, which support its funding ability and profitability.
The negative outlook on BAM’s ratings reflects the FIDF’s plans to partially privatise BAM through a stock exchange listing. BAM has mostly completed pre-listing preparations that have been ongoing since 2014, although full details of the plan and timelines have not yet been finalised. Nonetheless, the privatisation plan 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.
Any changes to BAM’s national longterm rating will have a similar effect on the issue’s rating.
Changes in the shareholding structure are likely to negatively affect BAM’s ratings. The extent of the impact would depend on BAM’s continued linkage with the state and level of state ownership. A state shareholding of below 50% and the removal of BAM’s regulatory advantages would be likely to result in a multiple-notch downgrade. 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 BAM’s shareholdings and regulatory advantages would lead to a revision of the outlook to stable and a possible re-assessment of the long-term rating.