RPT-Fitch Rates Krung Thai Bank's Basel III Tier 2 Notes Final 'BBB-'
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July 4 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Krung Thai Bank Public Company Limited's (KTB; BBB/Stable) USD700m 10.5 year Basel III-compliant Tier 2 subordinated notes a final rating of 'BBB-'. The notes are issued under the bank's USD2.5bn euro medium-term note (MTN) programme, and are issued out of KTB's Cayman Islands branch.
The rating action follows the completion of the subordinated notes issue, as well as the receipt of final documents that conform to information previously received. The final rating is the same as the expected rating assigned on 13 June 2014. The notes are the first publicly transacted US dollar-denominated Basel III-compliant Tier 2 subordinated notes out of Thailand.
KEY RATING DRIVERS
The rating is one notch below the anchor rating, which is KTB's Issuer Default Rating (IDR).
While Fitch's typical anchor rating for Basel III Tier 2 securities is the issuer's Viability Rating (which does not factor in any extraordinary government support), the IDR could be used if, in Fitch's view, there is an extremely strong likelihood of state action to prevent non-viability. In this case, if there is a need, Fitch expects there would be pre-emptive equity injections by the Thai government to maintain KTB as a going concern without triggering non-viability, and hence KTB's IDR would be the appropriate anchor.
KTB is 55% held by the Thai government's Financial Institutions Development Fund. It is the only state-owned commercial bank, with no prospects of any significant changes in the shareholding structure. KTB has close operational links with the Finance Ministry, and acts as the main payments and cash management provider to the government. The bank has also previously played a quasi-policy role, and although KTB has become increasingly commercial in its focus, we expect the bank to be called upon to perform policy functions in the future if necessary. Continuación...