CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'BB' to Jamaica Diversified Payment Rights Company's issuance of $100 million of series 2013-1 notes. The Rating Outlook is Stable. Fitch's rating addresses the timely payment of interest and principal on a quarterly basis in accordance with the transaction documents. The expected final payment date is March 15, 2018 with the option to extend the legal maturity date up to three years.
The issuance is backed by existing and future USD-denominated diversified payment rights (DPRs) originated by National Commercial Bank Jamaica Ltd. (NCBJ; long-term (LT) local currency Issuer Default Rating (IDR) of 'B-'; Outlook Negative).
KEY RATING DRIVERS
The assigned rating reflects (i) the credit quality of NCBJ and its going concern assessment score of 'GC1'; (ii) the sovereign rating and the overall debt restructuring process; (iii) overall cashflows and coverage levels which include a significant portion of domestic generated receivables; and (iv) the level of DPR related debt to overall funding and liabilities.
Over 70% of the Jamaican banking industry is held in two banks, NCBJ and Bank of Nova Scotia (BNS) with NCBJ being the largest in terms of assets (45% as of fiscal year-end [FYE] 2012). The bank was well positioned to manage the fallout from the government's recent debt restructuring, but the Negative Outlook on its ratings reflects downside risks for a more challenging operating environment if the government is not successful at implementing its IMF programme.
Pro forma quarterly debt service coverage ratios (DSCRs), calculated according to the transaction documents, are expected to be above 48.9 times (x) maximum quarterly debt service. The calculation considers average quarterly flows through DDBs for the past three years and excludes 65% of flows from certain entities which have large levels of domestic flows; the remaining amount is then divided by the maximum expected quarterly debt service to determine the respective DSCRs.
For purposes of Fitch's analysis, the agency excluded domestic receivables; Fitch's adjusted DSCR is 40.6x. In addition, the issuance represents only 2.79% of NCBJ's total liabilities.
RATING SENSITIVITIES
The rating is sensitive to changes in the credit quality of NCBJ. A downgrade of NCBJ's 'B-' local currency IDR could lead to a downgrade on the notes. In addition, severe reductions in coverage levels could also result in rating downgrades.
TRANSACTION SUMMARY
The notes are backed by future flows related to USD-denominated DPRs originated by NCBJ. DPRs are defined as electronic or other messages utilized by financial institutions to instruct NCBJ to make a payment to a beneficiary. For this transaction only USD-denominated MT102 and MT103 flows (or any other MT100 series) sent via the SWIFT system will be securitized.
The transaction structure benefits from notice and acknowledgment agreements signed with designated depositary banks (DDBs), Bank of New York Mellon, Citibank, HSBC, Barclays Bank PLC, and Wells Fargo, which irrevocably instruct them to deposit DPR flows into offshore accounts controlled by the indenture trustee. The percentage of DPR flows processed by DDBs has averaged over 90% of total DPRs since 2007.
NCBJ processed approximately $2.4 billion in DPR flows in 2012, up slightly from $2.3 billion in 2011. While these levels have steadily increased back to pre-crisis levels, a large portion of this growth comes from growing domestic receivables.
A new issue report providing additional details on this transaction will be available on Fitch's web site.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Future Flow Securitization Rating Criteria' (June 19, 2012);
--'Global Structured Finance Rating Criteria' (May 24, 2012).
Applicable Criteria and Related Research:
Future Flow Securitization Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681832
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=792659
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