NEW YORK & MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings expects to rate Coporacion Financiera de Desarrollo's (Cofide) upcoming USD300 million subordinated notes 'BBB(exp)'. The notes will mature in 2029, and interest payments will be made semi-annually until 2024 and quarterly thereafter. The notes will carry a fixed interest rate to be determined at closing until 2024 and a LIBOR-based floating rate thereafter. The final rating is contingent upon the receipt of final documents that confirm the information already received.
KEY RATING DRIVERS
Cofide 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).
Following Fitch's criteria, the notes will be rated one notch below Cofide's IDR, reflecting one notch for loss-severity, but no notches for non-performance risk relative to the bank's IDR, given that coupons are non-deferrable and non-cancelable.
The notes rank junior to Cofide's existing and future senior obligations and will be effectively subordinated to all of Cofide's secured indebtedness with respect to the value of its assets securing that indebtedness and certain direct, unsecured general obligations that in case of insolvency are granted preferential treatment pursuant to Peruvian law. The notes will rank pari-passu with all of Cofide's existing and future parity obligations.
Considering the entity's solid capital levels and moderate profitability, the impact on Cofide's leverage is not deemed significant by Fitch. No equity credit will be assigned to the notes under Fitch's criteria.
RATING SENSITIVITIES
The subordinated 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);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (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
Assessing and Rating Bank Subordinated and Hybrid Securities Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=836803
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