Bangkok--12 Jan--Fitch Ratings
Fitch Ratings has today upgraded Bank of Ayudhya Public Company Limited's ("BAY") Long-term foreign currency Issuer Default rating ("IDR") to 'BBB-' (BBB minus) from 'BB+', Short-term foreign currency to 'F3' from 'B', foreign currency subordinated debt rating to 'BB+' from 'BB' and Individual rating to 'C/D' from 'D'. Fitch has also affirmed the bank's Support ratings at '3'. At the same time, Fitch Ratings (Thailand) has also upgraded BAY's National Long-term rating to 'A+(tha)' from 'A(tha)', and National subordinated debt rating to 'A(tha)' from 'A-(tha)' (A minus(tha)) while the National Short-term rating of the bank has been affirmed at 'F1(tha)'. The Outlook on the ratings is Stable.
The rating action follows the completion of the acquisition by GE Capital International Holdings Corporation ("GECIH") of a significant stake in BAY via a private placement of 1,391 million new shares at THB16 each, totaling THB22.3 billion. BAY's major shareholder, the Ratanarak family, and other warrant holders have also made an early conversion of 463 million warrants at THB12 each, totaling THB5.6bn. This resulted in GECIH holding 29% of BAY's capital. GE also has the right to purchase an additional 609 million shares of BAY over the next five years. GE Money Retail Bank has completed the transfer of its assets totaling THB2.1bn and its deposits totaling THB1.4bn to BAY. The initial capital injection of THB27.8bn is expected to increase BAY's Tier 1 capital ratio to about 13.7% from 7.8% at end-September 2006, although additional provisioning could see this fall again.
BAY's 2006 results show continued improvement in underlying profitability, although it faces a tougher operating environment in 2007. The capital raising should address BAY's loan loss reserve and capital adequacy weaknesses that had, in part, previously constrained the bank's ratings. It is also expected to bolster the bank's franchise in the medium term. GE is participating in both the board and the management of BAY. BAY could also benefit from GE's expertise in global transaction services, technology and operations. The shift towards higher-margin consumer banking should also help improve the bank's profitability. Future rating actions will depend on further strengthening of balance sheet and profitability, franchise and the level of capital and operational support from GE.
Contacts: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301; Sylvia McKaige, Singapore, Tel: +65 6336 0095.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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