Fitch Ratings has affirmed the ratings on Minor International Public Company Limited's (MINT) US dollar guaranteed senior perpetual capital securities at 'BBB'.

The rating reflects the credit enhancement provided to investors by the guarantee from Thailand-based Bangkok Bank Public Company Limited (BBL, BBB/Stable) acting through its Singapore and Hong Kong branches.

Key Rating Drivers

Notes Equalised to Guarantor's Rating: The notes are rated at the same level as BBL's senior unsecured rating to reflect the credit enhancement provided to investors by the unconditional and irrevocable guarantee from BBL acting through its overseas branches. The guarantee ranks pari passu with BBL's unsecured and unsubordinated obligations.

Effective Maturity Dates: Fitch views the notes' first call date and the first reset date when the guarantee would terminate as the effective maturity dates. The guarantee will be in full effect until the earliest payment in full of the securities and the first call date (29 June 2023) for the USD300 million 3.1% guaranteed notes and the first reset date (19 July 2026) for the USD300 million 2.7% guaranteed notes. This is provided security holders respond in the manner required by the securities documentation.

Guarantor's Obligations: The guarantor is required to purchase the notes at a price that covers the principal amount, accrued interest, any deferred interest and interest on interest deferred should MINT not call the notes on the first call date for the USD300 million 3.1% guaranteed notes or the first reset date for the USD300 million 2.7% guaranteed notes (non-call event).

In addition to the mandatory purchase on a non-call event, BBL will also be obliged to purchase the notes at a price that is calculated on the same basis as above if MINT goes into bankruptcy 30 days prior to the first call date for the USD300 million 3.1% guaranteed notes or the first reset date for the USD300 million 2.7% guaranteed notes.

Maximum Guaranteed Amounts: The total guarantee from BBL is limited to a maximum of 110% of the principal of the 3.1% notes and 115% of the principal of the 2.7% notes. This is deemed sufficient to cover the principal, potential accrued and deferred interest, and interest on deferred interest of the notes that can be accumulated during the guaranteed period.

Derivation Summary

The rating on MINT's guaranteed notes is based solely on the unconditional and irrevocable guarantee from BBL.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

An upgrade of BBL's ratings would result in an equivalent change in the ratings on MINT's notes, which are based solely on BBL's guarantee.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A downgrade of BBL's ratings would result in an equivalent change in the ratings on MINT's notes, which are based solely on BBL's guarantee.

For the ratings of BBL, the following sensitivities were outlined by Fitch in a rating action commentary dated 27 July 2022:

Factors that could, individually or collectively, lead to negative rating action/downgrade:

IDR AND NATIONAL RATINGS

Negative rating action on both BBL's Government Support Rating (GSR) and Viability Rating (VR) would lead to similar action on the bank's Long-Term Issuer Default Rating (IDR), National Long-Term Rating and senior debt rating. BBL's National Rating could also be downgraded if, in Fitch's opinion, its credit profile weakens on a relative basis in the national-rating universe of rated entities in Thailand.

VR

The VR could be downgraded to 'bbb-' if BBL's financial position deteriorates more than we expect, which may be reflected in a downward revision of multiple rating factors. This may, for example, arise from a much weaker economic recovery due to global economic conditions, which could lead to expectations of sustained weaker financial performance and a reassessment of its business profile.

These stresses may be indicated by an impaired-loan ratio of above 6% for a sustained period (1Q22: 3.9%), combined with weaker loss absorption buffers, such as a common equity Tier 1 (CET1) ratio of below 13% and a loan-loss coverage ratio of less than 120%, and/or not sustaining an operating profit/risk-weighted asset (RWA) ratio above 1.5%.

GSR

There could be negative action on the GSR if the government's ability to provide support declines, which could be evident from a downgrade of Thailand's Long-Term Foreign-Currency IDR. There may also be negative rating action if Fitch believes that the government propensity to provide support to BBL is diminished, for example, through a large decline in the bank's systemic importance or significant regulatory changes. However, we believe it is unlikely government propensity to support BBL over the medium term will weaken.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

IDR AND NATIONAL RATINGS

There could be positive rating action on BBL's IDRs, National Ratings and senior debt ratings following similar changes in its GSR or VR. The National Ratings of BBL would also take into account the relative creditworthiness of peers rated on the national scale.

VR

BBL's VR could be upgraded to 'bbb+' if key metrics improve sustainably, with a business profile that leads to financial performance that is consistently better than the sector's without any meaningful increase in risk appetite.

This would be aided by a stronger operating environment and may be evident from key financial ratios such as an operating profit/RWA ratio above 2.5% (1Q22: 1.3%) and a four-year average impaired-loan ratio of less than 3%, combined with the maintenance of key buffers, such as a CET1 ratio above 16%. Nonetheless, near-term upside appears limited given the still challenging environment.

GSR

An upgrade of the GSR may be triggered by a similar action on Thailand's Long-Term Foreign-Currency IDR as this would indicate the government's higher ability to support systemically important banks such as BBL. Any upward revision of the GSR would also need to consider whether the government's propensity to support its banks remains intact.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

Issuer Profile

MINT is one of Asia-Pacific's largest hospitality and leisure companies. It owns 94% of NH Hotel Group S.A. (NHH, B/Stable) following an acquisition in 2018. MINT is listed on Thailand's stock exchange and NHH on Madrid's stock exchange.

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

The ratings on MINT's guaranteed senior perpetual capital securities are directly linked to the senior unsecured rating of BBL, the guarantee provider. A change in Fitch's assessment of the senior unsecured rating of BBL would automatically result in a change in the rating on MINT's notes. In addition, any change in Fitch's view on the contract of guarantee may result in a downgrade to the guaranteed securities.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

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