RAM Ratings puts OSK Investment Bank on positive Rating Watch

Published on 12 November 2012

RAM Ratings has placed OSK Investment Bank Berhad’s (“OSK Investment Bank’’) respective long- and short-term financial institution ratings of A1 and P1 on Rating Watch, with a positive outlook. Concurrently, the A2 rating of the Bank’s subordinated medium-term notes (“subordinated MTN”) issued under its RM400 million MTN Programme has also been placed on positive Rating Watch.

On 9 November 2012, RHB Capital Berhad and OSK Holdings Berhad concurrently announced to Bursa Malaysia that the former had acquired the 100%-interest in OSK Investment Bank from the latter. The Rating Watch is premised on this acquisition and the subsequent proposed merger with RHB Investment Bank Berhad (“RHB Investment”).

Upon completion of the proposed merger, the assets and liabilities of OSK Investment Bank will be assumed by RHB Investment. When this materialises, the financial institution ratings of OSK Investment Bank will cease to exist. At the same time, the long-term rating of the subordinated MTN will be upgraded to AA3 (stable outlook); the rating is 1 notch below RHB Investment’s long-term financial institution rating of AA2 (stable outlook), to reflect the subordination of the debt facility to RHB Investment’s senior unsecured obligations. If the proposed merger fails to materialise, the outlook on the Bank’s financial institution rating and the long-term rating of its subordinated MTN will revert to its previous position.

RAM Ratings' Rating Watch highlights a possible change in an existing rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rating under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Ratings will appear on RAM Ratings' Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings' Rating Watch, however, does not inevitably mean that the existing rating will be changed. It only means that a rating is under evaluation by RAM Ratings and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.

Media contact

Michael Ti

(603) 7628 1015

michael@ram.com.my