Bangkok--22 Jan--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Long-Term Rating of 'BB-(tha)' to KTB Securities (Thailand) Public Company Limited's (KTBST; BB(tha)/Stable) upcoming issue of up to THB400 million in subordinated debentures. The debentures will have a maturity of 1.5 years. The firm plans to use the proceeds from the issuance as working capital for its securities brokerage businesses.
KEY RATING DRIVERS
The subordinated debentures are rated one notch below KTBST's National Long-Term Rating of 'BB(tha)' to reflect their higher loss-severity risk relative to senior unsecured instruments arising from their subordinated status. Subordinated noteholders rank after senior creditors in the priority of claims.
Additional notching has not been applied to the subordinated debentures due to the lack of going-concern loss-absorption and equity-conversion features. Fitch has assigned an equity credit of 0% to the issue as the tenor is relatively short and the instrument is not designed to be a permanent part of the company's capital structure.
RATING SENSITIVITIES
Changes in KTBST's National Long-Term Rating would have a similar effect on the rating of the subordinated debentures.
KTBST's National Ratings are based on its standalone financial profile and reflect its small domestic franchise and weak financials compared with other Fitch-rated Thai securities peers. The ratings are supported by a new management team that has turned around the company's successive net losses prior to 2016. Nonetheless, Fitch expects KTBST's improving performance to remain more volatile than that of domestic rated peers over the medium-term due to its weaker franchise, as reflected in its less diversified and developing business model, and higher costs.
For more details on KTBST's key rating drivers and sensitivities, see Fitch Affirms KTB Securities (Thailand) at 'BB(tha)'; Outlook Stable, dated 12 July 2018.