Bangkok--21 May--Fitch Ratings
Fitch Ratings (Thailand) Limited has downgraded the National Long-Term Rating on Gulf Cogeneration Company Limited’s (GCC) THB2.9bn guaranteed debentures maturing April 2016 to ‘AA-(tha)’ from ‘AA(tha)’. The agency also placed the debentures’ rating on Rating Watch Negative (RWN).
The rating action follows the downgrade of the guarantor, DEPFA BANK plc’s (DEPFA) Long-Term Issuer Default Rating (IDR) to ‘BBB’ from ‘BBB+’ and the placement of its ratings on Rating Watch Negative (RWN).
KEY RATING DRIVERS
Guaranteed by DEPFA: The debentures’ rating is based entirely on the irrevocable and unconditional guarantee of the debentures’ principal and interest payment by DEPFA.
Resolution of RWN: The RWN on the rating on GCC’s guaranteed debentures will be resolved once the RWN on DEPFA’s Long-Term IDR is resolved.
RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- A positive rating action on DEPFA
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- A negative rating action on DEPFA
It should be noted that a one-notch change in an International rating could result in a change in a National Rating of more than one notch.
The rating of DEPFA, the following sensitivities were outlined by Fitch in its Rating Action Commentary of 19 May 2015.
DEPFA's ratings are sensitive to any new information which may affect our assessment of its owner FMS Wertmanagement’s (FMS WM) and ultimately Germany's propensity to ensure that capital and funding needs are met in the course of the bank's wind-down. In particular, the maintenance of a Long-Term IDR within the investment grade category is contingent upon clarity in the next few months, most likely in the form of a detailed wind-down plan, on FMS WM's strategy to wind down DEPFA.
We may also further downgrade DEPFA's IDRs if we consider that DEPFA's wind-down plan entails a significant bail-in risk for its senior creditors, given its recurring operating losses triggered by its run-down. The ratings could also be negatively affected by considerations that may arise if new wind-down plans or any need for recapitalisation prior to completion of the wind-down require new state aid approval, which could escalate the pace of wind-down and potentially cause losses that would require burden-sharing by senior creditors under Single Resolution Mechanism (SRM).
Any rating upgrade would be contingent on a positive change in Germany's propensity to support DEPFA and ensure senior creditors are repaid in full. While not impossible, this is highly unlikely in Fitch's view.
DEPFA's ratings are also sensitive to any change in Fitch's view of the support dynamics between Germany, FMS WM and DEPFA, in particular to significant changes in the relationship between Germany and FMS WM, although Fitch considers the latter scenario to be highly unlikely for the foreseeable future.