Bangkok--9 Aug--Fitch Ratings
Fitch Ratings (Thailand) has revised its Outlook on Bangkok Commercial Asset Management Public Company Limited's (BAM) National Long-Term Rating to Stable from Negative and has affirmed BAM's National Long-Term Rating at 'AA-(tha)'.
KEY RATING DRIVERS
The Outlook revision was based on Fitch's re-assessment on the timing of BAM's privatisation. There is still insufficient evidence that privatisation could occur in the short term, in Fitch's view. Nonetheless, Fitch believes that the likelihood of privatisation remains over the medium term. Fitch had placed its Negative Outlook on BAM's National Long-Term Rating in 2014, to reflect the plan to partially privatise BAM in a stock-exchange listing. A rating action could be triggered if there is a clearer prospect on the timing of privatisation.
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 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 benefited 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.
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
BAM's rating is sensitive to the prospect of privatisation and changes in the shareholding structure. The rating could be negatively affected if there is a more material evidence or significant progress of the privatisation. 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 on BAM's long-term credit 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 possible re-assessment of the National Long-Term Rating.
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