Fitch Rates YSTH#s THB and USD Subordinated Debentures #AA-(tha)#

Stocks and Financial Services Press Releases Tuesday February 20, 2018 16:04
Bangkok--20 Feb--Fitch Ratings

Fitch Ratings (Thailand) has assigned National Long-Term Ratings of 'AA-(tha)' to both Thai baht and US dollar-denominated portions of Yuanta Securities (Thailand) Company Limited's (YSTH; AA(tha)/Stable) upcoming subordinated debentures. YSTH will issue two separate debentures - one for each currency - where the combined amount of the two issues will at most be the equivalent of THB5 billion. At issue, both debentures will have a maximum tenor of five years. The firm plans to use the proceeds to support its regulatory liquidity requirements.

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.


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