TRIS Rating Upgrades Company & Subordinated Debt Ratings of “BAY” to “AAA” and “AA+” from “AA-” and “A+”and Changes Outlook to “Stable” from “Positive”

TRIS Rating has upgraded the company and subordinated debenture ratings of Bank of Ayudhya PLC (BAY) to “AAA” and “AA+”, respectively, from “AA-” and “A+”, and has revised its outlook to “stable” from “positive”. The rating upgrade follows The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) announcement on 18 December 2013, concerning its success in share tender offer of shareholdings in BAY from GE Capital International Holdings Corporation (GECIH), and the other shareholders. After the successful of the acquisition through the Voluntary Tender Offer (VTO), BTMU will become the largest shareholder, holding 72.01% stake in BAY. BAY will become a strategically important subsidiary of BTMU, and also has stronger business position in the Thai banking industry. The rating upgrade, therefore, reflects three notches enhancement from BAY’s stand-alone rating. The “stable” outlook reflects the expectation that BAY will benefit from stronger business profile and improving financial performances, after merging with BTMU Bangkok branch. The outlook also reflects strong business and financial support from new shareholder, BTMU, as a strategically important subsidiary of the BTMU Group.

On 2 July 2013, BAY announced that GECIH and BTMU signed the Share Tender Agreement. Under the terms of this agreement, BTMU will launch a share tender offer for all BAY shares (approximately 6,074 million shares) at Bt39 per share. GECIH will participate in the tender offer and tender its entire shareholding (approximately 1,538 million shares) at the tender offer price. The share tender offer commenced on 7 November 2013 and ended on 13 December 2013.

On 18 December 2013, BTMU announced the completed share acquisition transactions. BTMU becomes the new major shareholder in BAY, holding 72.01% stake in BAY, and also becomes a strategic partner with the Ratanarak Group which holds 25% stake in BAY. In accordance with the One Presence Policy of the Bank of Thailand (BOT), BTMU and BAY will integrate BTMU Bangkok branch with BAY. Pursuant to a Conditional Branch Purchase Agreement (BPA) signed with BAY on 18 September 2013, BTMU will integrate BTMU Bangkok branch with BAY though the contribution in kind of the BTMU Bangkok branch business to BAY within one year from the date of the acquisition of BAY shares through the VTO. In exchange for the contribution in kind, BAY will issue 1,143,221,782 common shares to BTMU, and BTMU’s ownership in BAY is expected to be 76.44% after the integration. This integration will enhance BAY’s business profile and strengths in terms of well-balanced loan portfolio mix of retail, corporate, and small-medium enterprises.

BAY is the fifth-largest Thai commercial bank in terms of total assets, with 8% in market share in assets, 9% in loans, and 8% in deposits as of September 2013. BAY’s total consolidated assets reached Bt1,145 billion. BTMU is the wholly-owned subsidiary of Mitsubishi UFJ Financial Group Inc. (MUFG), Japan’s largest financial group and one of the world’s largest financial groups. BTMU has a sound financial profile, an adequate risk management system, and close business links with affiliated companies in MUFG. As of September 2013, BTMU’s full foreign branch in Thailand had the asset size of Bt548 billion (C.B.1.1. report), with 5% market share in assets, 3% in loans, and 2% in deposits.

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