Moody changes BAY's deposit rating outlook to positive

 

"We do not expect any significant changes to the management team or the strategy of BAY's existing businesses as a result of the proposed acquisition. We note that BTMU is considering to eventually merge its Thai branch with BAY. Moody's will assess the impact of such a transaction on BAY's financial profile and strategic direction once there are more details announced concerning this proposed integration," said Simon Chen, a Moody's Assistant Vice-President and Analyst.

On July 2, the Bank of Tokyo-Mitsubishi UFJ's (BTMU) announced the plan to acquire a majority equity stake in BAY. In the announcement, BTMU has agreed to purchase GE Capital International Holdings' 25 per cent stake in BAY and will then make a voluntary tender offer that could take its total stake in the bank up to 75 per cent. The acquisition will be entirely settled in cash and BTMU has announced no plan to raise any capital to fund the transaction. BTMU expects to close the transaction by year-end. 

The outlook change reflects Moody's expectation that BAY may benefit from support in times of stress from its new parent BTMU upon successful completion of the transaction. BTMU expects the planned acquisition to be completed by December 2013.

"In the scenario that BTMU succeeds in acquiring a majority stake in BAY, we expect BTMU to be a supportive shareholder, considering the complementary benefits that BAY's established Thai franchise would add to BTMU's existing Thai branch operations and overseas network, and BTMU's track record of demonstrating strong commitment to its overseas 

investments," said Chen.

As such, BAY's deposit rating may benefit from an additional notch of uplift, upon the conclusion of the transaction.