TRIS Rating Assigns “A/Positive” Company Rating to “AYCAL”

TRIS Rating Co., Ltd. has assigned a “A” company rating with “positive” outlook for Ayudhya Capital Auto Lease PLC (AYCAL), formerly known as GE Capital Auto Lease PLC (GECAL). The rating is enhanced from AYCAL’s standalone rating as AYCAL is a core strategic subsidiary of Bank of Ayudhya PLC (BAY) in the automobile hire purchase business, fulfilling its parent’s universal banking policy. BAY is currently rated by TRIS Rating at “A+” with a “positive” outlook. AYCAL’s standalone rating is based on the company’s strong market position in the automobile and motorcycle hire purchase businesses, its experienced management team with a proven track record and its good risk management system. However, these strengths are partially offset by intense competition in used car and motorcycle hire purchase businesses and a less favourable operating environment, which may adversely impact AYCAL’s business expansion, financial performance and asset quality in the future.

The “positive” outlook reflects the expectation that AYCAL’s business direction will closely align with BAY Group’s business strategy, and the company continues to get strong support from BAY. The outlook also considers AYCAL’s management ability to sustain strong market position in used car and motorcycle hire purchase businesses. With AYCAL’s experienced management, good risk management system and strong support from BAY, TRIS Rating expects the company would be able to maintain good-quality assets and improve its financial performance in the medium term.

TRIS Rating reported that AYCAL was formerly a wholly-owned subsidiary of GE Capital Asia Investment Inc (GECAI). The company became BAY’s wholly-owned subsidiary in February 2008, following BAY’s business reorganization, after GE Capital International Holdings Corporation (GECIH) held a 34.71% stake in BAY. AYCAL’s total receivables accounted for 12% of BAY’s consolidated outstanding loans, while AYCAL’s net income for the first half of 2008 contributed 15% to BAY’s consolidated net income. Business and financial supports from BAY are expected to enhance AYCAL’s market position in its core businesses and to improve its financial flexibility. AYCAL has applied the risk management model from its parent’s practice, which is regulated under the same standard criteria set by the Bank of Thailand.

AYCAL is the fifth largest among 20 auto hire purchase operators in TRIS Rating’s database, with Bt87,448 million of gross outstanding loan portfolio or 10% market share in 2007. Also, the company is the second largest motorcycle hire purchase operator, having outstanding loans of Bt5,443 million in 2007. With 16-year experience in the industry, AYCAL has developed a proficient management team and business platform that has enabled the company to compete in this very competitive industry. According to BAY Group’s business reorganization, AYCAL stopped new car hire purchase business, and the new contracts started to book on BAY’s new subsidiary in January 2007. In February 2008, AYCAL transferred about Bt7 billion of secured personal loan business, Car4Cash, to BAY’s new subsidiary. The company added new business to be a loan servicing for BAY’s hire purchase portfolio. Currently, AYCAL focuses to provide used car and motorcycle hire purchase services. The outstanding loans net unearned interest in 2007, therefore, declined by 8.6% from Bt86,465 million at the end of 2006 to Bt78,966 million at the end of 2007. Net interest income for 2007 was reported at Bt6,076 million, lower than Bt6,180 million reported in 2006. However, AYCAL’s profitability recovered in 2007. Returns on average assets and on average equity increased to 2.38% and 25.86%, respectively in 2007, from 1.26% and 15.78% in 2006.

Due to good credit risk management and efficient collection system, AYCAL had good asset quality, despite its high risk-high return portfolio. As of December 2007, its non-performing loans, defined as delinquent loans with more than three months overdue, accounted for only 1.93% of average loans. The figure is considered low, when compared with that of its peers in used car and motorcycle hire purchase industry. Although AYCAL’s shareholders’ equity to total asset improved to 12.14% at the end of 2007 from 8.80% in 2006, as its loan portfolio declined, AYCAL’s capital is considered lower than other hire purchase operators in the high risk-high return market segments in TRIS Rating’s account. However, TRIS Rating expects AYCAL to have a stronger capital from internal growth of operating income in the future. — End

Company Rating: A Rating Outlook: Positive Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.

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