TRIS Rating Places a “Negative” CreditAlert on Company & Senior Unsecured

TRIS Rating places CreditAlert with a “negative” implication on the company rating currently assigned to Ratchthani Leasing PLC (THANI) at “A-” and the ratings on THANI’s senior unsecured debentures at “A-”. The CreditAlert follows the signing of non-binding memorandum of understanding (MOU) by five parties including: TMB Bank PLC (TMB), Thanachart Bank PLC (TBANK), Thanachart Capital PLC (TCAP), ING Groep N.V. (ING), and The Bank of Nova Scotia (BNS) on 26 February 2019 to proceed with a merger between TMB and TBANK.

We note that at this point the transaction remains uncertain and subject to the precedent conditions specified in the Stock Exchange of Thailand (SET) disclosure, as the due diligence process will span over the next few months. The transaction remains to be approved by relevant regulators, including the Ministry of Finance (MOF), the Bank of Thailand, and the Securities and Exchange Commission, as well as the shareholders of both banks. If the transaction is approved, the entire process is expected to be completed by end-2019.

We note that the company and issue ratings of THANI remain unchanged as of this CreditAlert announcement. However, based on our rating methodology, we placed the “negative” CreditAlert on THANI as THANI’s ratings could be downgraded or remain unchanged from the current level. This is because THANI’s ratings may no longer benefit from its linkage to TBANK as a majority-owned parent of THANI, once TBANK is amalgamated with TMB to form a new bank and/or THANI becomes a controlled subsidiary of TCAP. THANI’s ratings will depend largely on its stand-alone financial performance and profile and/or its relationship with TCAP.

TRIS Rating expects to resolve the CreditAlerts upon completion of the transaction or when available data is sufficient to enable us to make in-depth analysis and conclusion on the ratings of THANI.

Details of transaction

According to the announced plan, the merger only focuses on TBANK’s banking business. TBANK is therefore required to divest its holding in most of its subsidiaries and other investments to its shareholders based on respective shareholding (TCAP 51%; BNS 49%). As a consequence THANI, which is currently 65%-owned by TBANK, will be divested along with other subsidiaries including Thanachart Securities PLC (TNS; 100%), Thanachart Insurance PLC (TNI; 100%), and TS Asset Management Co., Ltd. (TS AMC; 100%). Ultimately, THANI is likely to become TCAP’s affiliated company or subsidiary pending on the final conclusion of divestments, if the transaction is successful.

TMB estimates the total consideration at about Bt130-Bt140 billion. The transaction will be 70% equity-funded and 30% debt-funded (part of this may come from TMB’s excess liquidity). The equity financing will derive from new share offering, comprising: 1) a rights offering to TMB’s existing shareholders (Bt40-Bt45 billion); and 2) share offering to TCAP and BNS at 1.1 times TMB’s book value post-recapitalization (Bt50-Bt55 billion).

If the merger is successful, ING and TCAP are expected to hold more than 20% each in the combined bank. MOF is expected to hold less than 20%, while BNS is likely to hold a minimal stake in the new bank.

RELATED CRITERIA

- Nonbank Lending Company, 7 May 2018

- Group Rating Methodology, 10 July 2015

Ratchthani Leasing PLC (THANI)

Company Rating: A-

Issue Ratings:

THANI201A: Bt1,510 million senior unsecured debentures due 2020 A-

THANI203A: Bt1,450 million senior unsecured debentures due 2020 A-

THANI205A: Bt1,000 million senior unsecured debentures due 2020 A-

THANI206A: Bt2,000 million senior unsecured debentures due 2020 A-

THANI208A: Bt1,500 million senior unsecured debentures due 2020 A-

THANI209B: Bt665 million senior unsecured debentures due 2020 A-

THANI20DA: Bt1,400 million senior unsecured debentures due 2020 A-

THANI20DB: Bt600 million senior unsecured debentures due 2020 A-

THANI20DC: Bt2,500 million senior unsecured debentures due 2020 A-

THANI211A: Bt175 million senior unsecured debentures due 2021 A-

THANI212A: Bt1,800 million senior unsecured debentures due 2021 A-

THANI212D: Bt720 million senior unsecured debentures due 2021 A-

THANI221A: Bt2,070 million senior unsecured debentures due 2022 A-

CREDITALERT: Negative

TRIS Rating Co., Ltd./www.trisrating.com

Contact: santaya@trisrating.com, Tel: 0-2098-3000/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand

? Copyright 2019, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution, or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited, without the prior written permission of TRIS Rating Co., Ltd. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.

TRIS Rating Places a “Negative” CreditAlert on Company & Senior Unsecured Debt Ratings of “THANI”