MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings expects to rate Coporacion Financiera de Desarrollo's (Cofide) upcoming USD300 million notes 'BBB+(exp)'. The notes will mature in 2019, and interest payments will be made semi-annually. The notes will carry a fixed interest rate to be determined at closing. The final rating is contingent upon the receipt of final documents to confirm the information already received.
KEY RATING DRIVERS
Cofide's has a long-term foreign currency Issuer Default Rating (IDR) of 'BBB+', driven by the potential support that Cofide would receive from its majority owner, the Republic of Peru, should it be required. Given Cofide's key role in implementing economic development policy, the government has, in Fitch's opinion, a vested interest in supporting Cofide. Peru's ability to support Cofide is reflected in its sovereign rating ('BBB+'/Stable Outlook). Fitch expects to rate the notes at 'BBB+', at the same level as Cofide's IDR.
The notes will be senior unsecured debt but in the event of liquidation will be effectively subordinated to certain direct, unsecured general obligations that in case of insolvency are granted preferential treatment under Peruvian law such as: (i) labor claims, (ii) tax claims, (iii) existing and future secured indebtedness, to the extent of the assets securing such indebtedness, and (iv) existing senior unsecured indebtedness, which have priority in right of payment based on the date incurred. The notes will rank senior to all of Cofide's existing and future subordinated debt.
In Fitch's opinion, the aforementioned legal disclosure is neutral to the current rating; although, in case of liquidation of the bank, it may affect the recovery prospects of different debt instruments. However, Fitch believes there is a low probability of such a scenario. Considering the entity's solid capital levels and moderate profitability, the impact on Cofide's leverage is not deemed significant by Fitch.
RATING SENSITIVITIES
The senior unsecured notes' expected rating is sensitive to any changes in Cofide's IDR ('BBB+') which would generally move in line with Peru's sovereign rating given its state-owned financial institution nature. Although not a baseline scenario, Cofide's ratings could be affected if, in Fitch's opinion, the Republic of Peru's willingness to support Cofide weakens.
Fitch currently rates Cofide as follows:
--Long-term foreign currency IDR 'BBB+'; Stable Outlook;
--Short-term foreign currency IDR 'F2';
--Long-term local currency IDR 'A-'; Stable Outlook;
--Short-term local currency IDR 'F2';
--Support rating '2';
--Support floor 'BBB+';
--Senior unsecured debt 'BBB+';
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=836796
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