Fitch Ratings (Thailand) has assigned a National Short-Term Rating of 'F2(tha)' to CGS-CIMB Securities (Thailand) Co., Ltd.'s (CGS-CIMB TH; A(tha)/Stable/F1(tha)) proposed Thai baht-denominated subordinated debentures. The firm plans to use the issuance proceeds for working capital to support its business operations.
KEY RATING DRIVERS
The 'F2(tha)' National Short-Term Rating on the subordinated debentures is derived from the implied National Long-Term Rating of 'A-(tha)', based on Fitch's rating correspondence table for short- and long-term ratings.
The implied National Long-Term Rating of the subordinated debentures of 'A-(tha)' is one notch below CGS-CIMB TH's National Long-Term Rating of 'A(tha)' to reflect the subordinated debentures' higher loss-severity risk relative to senior unsecured instruments. This arises from the debentures' subordinated status, as subordinated noteholders rank after senior creditors in the priority of claims.
Additional notching has not been applied due to the lack of going-concern loss-absorption and equity conversion features. Fitch uses the Corporate Hybrids Treatment and Notching Criteria for this assessment, in line with our approach for other Thai securities firms.
CGS-CIMB TH's National Long-Term Rating is driven by Fitch's expectation of shareholder support from CGS-CIMB Securities International Pte. Ltd. (CGS-CSI) based on CGS-CIMB TH's role as a core subsidiary that operates in Thailand, which is one of CGS-CSI's core markets. For further details on CGS-CIMB TH's key rating drivers and rating sensitivities, please see our latest rating action commentary, Fitch Affirms National Ratings on Three Foreign-Owned Securities Companies in Thailand, dated 20 May 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Fitch may downgrade CGS-CIMB TH's subordinated debt rating if the firm's National Long-Term Rating were to be downgraded to 'BBB+(tha)', which may arise from any weakening in the parent's credit profile and/or support propensity.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rating on CGS-CIMB TH's subordinated debt will be upgraded if its National Long-Term Rating, which is the anchor rating, is upgraded.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
CGS-CIMB TH's rating is linked to the credit profile of its parent, CGS-CSI.
Additional information is available on www.fitchratings.com