Bangkok--20 Oct--TRIS Rating
TRIS Rating Co., Ltd. said that the ratings of Siam Commercial Leasing PLC (SCBL) and its senior debentures are affirmed at “A-” with “stable” outlook even if the debentureholders consent to amend the terms and conditions of the debentures.
TRIS Rating said, as proposed, SCBL will retain the covenant which requires the debt to equity (D/E) ratio to be below 8 times. However, the amount of total debt used to calculate the ratio will change to exclude debts from its parent, Siam Commercial Bank PLC (SCB). The restrictive covenant to maintain the D/E ratio below 8 times will limit all borrowing and thus limit SCBL’s loan portfolio expansion even if the funding is provided by SCB. SCBL has proposed to amend the definition of debts used to calculate the D/E ratio to exclude debts from SCB in order to fully utilize its exclusive and secure funding source.
SCB’s plan to acquire more SCBL’s shares was accomplished through a voluntary tender offer during 13 March to 28 April 2006. SCB owned 95.3% of SCBL at the end of August 2006. SCB clearly showed its intention to be a universal bank and will use SCBL as its arm to operate the hire purchase business. While SCBL will be able to draw on SCB’s support through SCB’s extensive branch network nationwide and ample supply of funds.
Although SCBL will have higher leverage if SCB supports SCBL’s portfolio expansion with loans to SCBL instead of new equity, the benefits from being a strategic subsidiary of SCB will help offset such a risk. If the debentureholders approve the change in the terms and conditions of the debentures as proposed, the company and issue ratings of SCBL will still be maintained at “A-/Stable”, said TRIS Rating.