Fitch Ratings (Thailand) has today assigned a National Long-Term Rating of 'AA-(tha)' to Maybank Kim Eng Securities (Thailand) Public Company Limited's (MBKET; AA(tha)/Stable/F1+(tha)) upcoming Thai baht subordinated debentures. The firm plans to use the proceeds from the issuance to manage its funding and liquidity requirements.
KEY RATING DRIVERS
The National Long-Term Rating on the debentures is one notch below the anchor rating of 'AA(tha)'. The notching reflects the notes' higher loss-severity risks compared with senior unsecured instruments as subordinated noteholders rank after senior creditors in the priority of claims. The notching also incorporates the subordinated debentures' lack of going-concern loss-absorption and equity conversion. Fitch has assigned an equity credit of 0% to the issue as the tenor is relatively short and the instrument is not designed to be a permanent part of the company's capital structure, as per Fitch's Corporate Hybrids Treatment and Notching Criteria.
The agency has used MBKET's National Long-Term Rating of 'AA(tha)' as the anchor rating for the subordinated instrument. MBKET's National Long-Term Rating is driven by institutional support, as Fitch believes the Thai firm is strategically important to parent Malayan Banking Berhad (Maybank, BBB+/Stable/bbb+). Malaysia-based Maybank holds a majority stake in MBKET and there is a high degree of management control and integration.
For further details on MBKET's key rating drivers and rating sensitivities, please see our latest commentary, "Fitch Affirms Five Thai NBFI Foreign Subsidiaries' National Ratings; Places Capital Nomura on RWN", dated 27 May 2020, at https://www.fitchratings.com/site/pr/10123704.
Factors that could, individually or collectively, lead to positive rating action/upgrade: An upgrade of MBKET's National Long-Term Rating, which may arise from an increase in the ability or propensity of Maybank to support MBKET, would lead to an upgrade of its subordinated notes. Factors that could, individually, or collectively, lead to negative rating action/downgrade: A downgrade of MBKET's National Long-Term Rating would lead to a downgrade of the subordinated debenture rating, which may arise from a decline in the ability or propensity of Maybank to support MBKET.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]