RAM Ratings: Bank Pembangunan’s purchase of Danajamin has no impact on AAA ratings

Bank Pembangunan's acquisition of Danajamin Nasional Bhd will allow the enlarged entity to have a greater market impact.

KUALA LUMPUR: Bank Pembangunan Malaysia Bhd’s acquisition of Danajamin Nasional Bhd will allow the enlarged entity to have a greater market impact, cementing its strategic importance, RAM Ratings says.

This corporate exercise reflects the government’s commitment to strengthen the development finance industry by streamlining the public policy mandates of development financial institutions, it said on Monday.

“Both Bank Pembangunan and Danajamin are currently rated AAA/Stable/P1 and our rating assessments already considered the solid backing of the government, anchored by the role of each entity in fulfilling the nation’s developmental agenda,” it said.

As background, Bank Pembangunan provides medium to long-term financing to sectors vital to the country’s socio-economic development.

Danajamin – the national financial guarantee insurer – is tasked with developing the debt capital markets through credit enhancements for bond and sukuk issuances.

“If well executed, the acquisition will yield synergistic advantages given the complementary roles of the entities.

“Post-acquisition, Danajamin will become a wholly owned subsidiary of Bank Pembangunan. Details on the eventual corporate structure and operational integration have not been disclosed at this time,” it said.

Bank Pembangunan will acquire Danajamin’s shares from Credit Guarantee Corporation Malaysia Bhd and Minister of Finance (Incorporated). Slated to be completed in November this year, the exercise will be funded with a combination of cash and issuance of new shares.

“We expect the move to have minimal impact on Bank Pembangunan’s capitalisation. The Bank’s tier-1 and total capital ratios stood strong at 33.4% and 42.6%, respectively, as at end-June 2021.

“Consequently, we do not envisage the corporate exercise to affect the AAA/Stable ratings of Bank Pembangunan’s RM7bil Conventional Medium Term Notes (MTN) and/or Islamic Murabahah MTN Programmes (2006/2036).

“Similarly, we do not anticipate any changes to the respective AAA/Stable and AA1/Stable ratings of the Senior and Subordinated Sukuk under Danajamin’s RM2bil Sukuk Murabahah Programme,” RAM Ratings said.