KEY RATING DRIVERS
Fitch rates YSTH's subordinated debt one level below the anchor rating of 'AA(tha)'. Subordinated noteholders rank after senior creditors in the priority of claims. The notching reflects the notes' higher loss-severity risks compared with senior unsecured instruments due to their subordination to the latter. The notching also incorporates the subordinated debentures' lack of going-concern loss-absorption and equity conversion. Fitch has not assigned an equity credit to the issue, as the instruments are not designed to be a permanent part of the company's capital structure and the issuer cannot defer coupon payments on the instruments.
The agency uses YSTH's National Long-Term Rating, which is underpinned by institutional support, as the anchor rating for the subordinated instruments. The Thai firm is strategically important to Yuanta Financial Holding Co., Ltd. (YFHC; BBB+/Stable), which owns 99.99% of YSTH.
Fitch believes that the rating of the US dollar-denominated bonds appropriately addresses the instrument's transfer and convertibility risks. For YSTH's upcoming US dollar bond, such risks do not warrant additional notching.
RATING SENSITIVITIES
Changes in YSTH's National Long-Term Rating would have a similar effect on the rating of the subordinated notes.
YSTH's National Long-Term Rating, in turn, is sensitive to changes in the level of institutional support, which reflects Fitch's view of YFHC's capacity and propensity to provide timely extraordinary support to YSTH if needed.