TRIS Rating Changes Outlook of “BAY” to “Positive” from “Stable”

Tuesday 09 July 2013 08:19
TRIS Rating has revised the outlook of Bank of Ayudhya PLC (BAY) to “positive” from “stable”, and has affirmed the company and issue ratings of Bank of Ayudhya PLC (BAY) at “AA-” and “A+”, respectively. The outlook revision follows the announced potential shareholding change of BAY’s major shareholder from GE Capital International Holdings Corporation (GECIH) (holding a 25.33% stake in BAY) to The Tokyo-Mitsubishi UFJ, Ltd. (BTMU) under a Share Tender Agreement regarding GECIH’s shareholding in BAY. BTMU plans to acquire a majority stake in BAY through Voluntary Tender Offer (VTO), expected to close the acquisition process in December 2013. If the acquisition succeeds as planned, BAY will become a strategically important subsidiary of BTMU, and also has stronger business position in the Thai banking industry. The “positive” 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 a likelihood that BAY’s rating will be enhanced from its current stand-alone rating by BTMU’s stronger credit profile, incase that BTMU can acquire at least a 50% shareholding stake or more in BAY.

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 VTO 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 VTO is expected to start in early November 2013 and close in December 2013. This transaction, however, is subject to regulatory approval, approvals by BAY’s shareholders of amendments to the relevant articles of association, and the fulfillment of certain conditions.

After completing the transaction, BTMU will become the new major shareholder in BAY and a strategic partner with the Ratanarak Group, a group of BAY’s current large shareholders. After the tender offer is concluded, BTMU and BAY will discuss future collaboration to strengthen their strategic partnership. In addition, in accordance with the One Presence Policy of the Bank of Thailand, BTMU and BAY will discuss the potential integration of BTMU’s existing Bangkok branch with BAY. The integration, once agreed, will take place once the VTO is complete. 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 March 2013. BAY’s total consolidated assets reached to Bt1,103 billion. BTMU is the major bank in Mitsubishi UFJ Financial Group Inc. (MUFG), the largest financial group in Japan. BTMU has a sound financial profile, an adequate risk management system, and close business links with affiliated companies in MUFG. As of March 2013, BTMU’s full foreign branch in Thailand had the asset size of almost Bt600 billion (C.B.1.1. report), with 5% market share in assets, 3% in loans, and 2% in deposits.

Bank of Ayudhya PLC (BAY)

Company Rating: AA-

Issue Rating:

BAY206A: Bt20,000 million subordinated debentures due 2020 A+

Rating Outlook: Positive