Fitch Rates ICBCT's Basel III Tier 2 THB Debentures 'AA+(tha)'
Fitch Ratings (Thailand) has today assigned a National Long-Term Rating of 'AA+(tha)' to the upcoming Thai baht-denominated Basel III-compliant Tier 2 subordinated unsecured debentures of Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT; AAA(tha)/Stable).
The debentures will have a tenor of Bank of ChinaFitch Ratings.5 years with a redemption option. The proceeds from the issuance will be used to fund expansion of the bank's loan portfolio and boost its total capital ratio.
KEY RATING DRIVERS
Fitch rates ICBCT's Basel III Tier 2 debentures one notch below ICBCT's National Long-Term Rating of 'AAA(tha)' to reflect their higher loss-severity risk compared to senior unsecured instruments.
Key terms of the debentures include a non-viability trigger, defined as emergency capital assistance from the central bank or any other empowered government agency, with no mandatory full write-down features.
The Tier 2 debentures are more senior to any Additional Tier Bank of China securities and equity. In the event of a write-down, the Tier 2 debentures would be written down on a pari passu basis with all other Tier 2 loss-absorbing instruments with write-down features.
ICBCT's National Long-Term Rating is underpinned by Fitch's belief of an extremely high probability of extraordinary support, if required, from Industrial and Commercial Bank of China (ICBC; A/Stable), its parent. This is based on ICBCT's important role in supporting ICBC's regional business, ICBC's 97.9% stake in the Thai subsidiary, and brand-sharing.
RATING SENSITIVITIES
The issue rating will be sensitive to any changes in ICBCT's National Long-Term Rating, which itself is driven by the rating of ICBC. Negative rating action on the IDRs on ICBC could lead to similar action on ICBCT's ratings and its issue rating.
Fitch may downgrade ICBCT's National Rating and hence its issue rating if there are signs the parent's propensity to provide support has reduced. For example, this might be evident from ICBC significantly reducing its ownership in or financial commitments to the subsidiary. However, Fitch does not expect this to occur in the near term.
The debentures will have a tenor of Bank of ChinaFitch Ratings.5 years with a redemption option. The proceeds from the issuance will be used to fund expansion of the bank's loan portfolio and boost its total capital ratio.
KEY RATING DRIVERS
Fitch rates ICBCT's Basel III Tier 2 debentures one notch below ICBCT's National Long-Term Rating of 'AAA(tha)' to reflect their higher loss-severity risk compared to senior unsecured instruments.
Key terms of the debentures include a non-viability trigger, defined as emergency capital assistance from the central bank or any other empowered government agency, with no mandatory full write-down features.
The Tier 2 debentures are more senior to any Additional Tier Bank of China securities and equity. In the event of a write-down, the Tier 2 debentures would be written down on a pari passu basis with all other Tier 2 loss-absorbing instruments with write-down features.
ICBCT's National Long-Term Rating is underpinned by Fitch's belief of an extremely high probability of extraordinary support, if required, from Industrial and Commercial Bank of China (ICBC; A/Stable), its parent. This is based on ICBCT's important role in supporting ICBC's regional business, ICBC's 97.9% stake in the Thai subsidiary, and brand-sharing.
RATING SENSITIVITIES
The issue rating will be sensitive to any changes in ICBCT's National Long-Term Rating, which itself is driven by the rating of ICBC. Negative rating action on the IDRs on ICBC could lead to similar action on ICBCT's ratings and its issue rating.
Fitch may downgrade ICBCT's National Rating and hence its issue rating if there are signs the parent's propensity to provide support has reduced. For example, this might be evident from ICBC significantly reducing its ownership in or financial commitments to the subsidiary. However, Fitch does not expect this to occur in the near term.
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