Thai Bank Acquires AIG Bank, Card Business; S&P: ‘No Rating Change’

February 9, 2009

Thailand’s Bank of Ayudhya Public Company Limited (BAY) and American International Group, Inc. (AIG) announced an agreement under which BAY will acquire AIG Retail Bank Public Company Limited and AIG Card (Thailand) Company Limited.

The transaction, which is subject to the approval of the Bank of Thailand and BAY’s shareholders, is expected to be completed in April 2009.

“Under the terms of the agreement, BAY will acquire 99.5 percent of the shares of AIG Retail Bank and 100 percent of AIG Card (Thailand) for a total consideration of Baht 2.055 billion or US $58.7 million (subject to closing valuation adjustment),” said the bulletin. “In addition, inter-company loans totaling US $477 million from AIG will be repaid at closing.

“The combined assets of the two companies are expected to increase BAY’s assets by approximately Baht 32 billion, which brings its current assets from approximately Baht 745 billion to 777 billion. The transaction will increase BAY’s retail loans by 14 percent and approximately 220,000 credit cards in force.

In a comment of the proposed transaction, Standard & Poor’s Ratings Services said that its counterparty credit rating on (BAY; ‘BBB-‘/Stable/A-3) “is not affected by the bank’s announcement to acquire two small businesses from American International Group Inc. “The acquisition is unlikely to affect BAY’s management and financial profile,” S&P added.

“At less than 2.5 percent of its total capital at the end of 2008, the acquisition price is small in scale but the move fits with its growth strategy to increase its retail loan portfolio to 50 percent of total loans by 2010. It will increase BAY’s retail loan portfolio to 36 percent of total loans from 32 percent currently. We expect the transaction to provide cross-selling opportunities for a wide range of products to the acquired AIG unit’s customers.”

Source: Bank of Ayudhya – www.krungsri.com and Standard & Poor’s – www.standardandpoors.com

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