Bangkok--19 Feb--Fitch Ratings
Fitch Ratings has downgraded Bangkok Commercial Asset Management Public Company Limited's (BAM) National Long-Term Rating to 'BBB+(tha)', from 'AA-(tha)', and National Short-Term Rating to 'F2(tha)', from 'F1+(tha)'. The Outlook is Stable. All ratings have been removed from Rating Watch Negative.
The downgrade follows the completion of BAM's stock market listing in December 2019, which reduced the government's shareholding in BAM to 45.8%, from 99.99%. This means BAM is no longer a state-owned enterprise.
KEY RATING DRIVERS
We believe government support can no longer be relied upon after the change in shareholding, as the large reduction in state ownership of BAM indicates that the company is not a long-term strategic shareholding of the state and that its policy role is lower than that of other state-owned financial institutions.
BAM is less likely to play a role in supporting government policy as a listed and a more commercially oriented company. Furthermore, as a non-bank financial institution, BAM's systemic importance is lower compared with large depository corporations. Hence, we now assess BAM's ratings based on its standalone credit profile, which is lower than its previous support-driven national ratings.
BAM's National Long-Term Rating is based on its narrowly focused business profile of acquiring and resolving non-performing assets and its high leverage - as measured by its debt/EBITDA ratio - which we expect to rise above 8x over the medium term, as estimated from the four-year average ratio. The rating also takes into account BAM's acceptable collection and earnings record, improved maturity profile and reasonable available credit facilities which should mitigate funding and liquidity risks over the short to medium term. We believe funding access stability will be tested, as BAM will no longer benefit from being a state-owned enterprise.
The Stable Outlook reflects Fitch's expectation that BAM will maintain steady operating performance, such as in collection and earnings, over the medium-term without a large increase in risk appetite or leverage, as may be indicated rapid asset growth or higher debt.
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
Rating upside appears limited, and might occur only if there is a significant and sustained improvement in BAM's leverage accompanying with a stable company profile.
The rating could be downgraded if BAM's funding and market access is disrupted due to the change in its legal status from being a state-owned enterprise. Any material weakening of leverage, such as measured by its debt/EBITDA ratio at over 10x for a sustained period, could trigger a downgrade. Moreover, a significant increase in funding costs and weakening interest coverage, such as an EBITDA/interest ratio of below 2x or a shortening in the company's funding maturity profile, could lead to a downgrade.
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