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
The issuance is backed by existing and future USD-denominated diversified payment rights (DPRs) originated by National Commercial Bank Jamaica Ltd. (NCBJ; long-term local currency (LC) Issuer Default Rating (IDR) of 'B-'; Outlook Negative). DPRs are defined as electronic or other messages utilized by financial institutions to instruct NCBJ to make a payment to a beneficiary.
KEY RATING DRIVERS
The affirmation reflects (i) the credit quality of NCBJ and its going concern assessment score of 'GC1'; (ii) coverage levels which include a significant portion of domestically originated receivables or flows considered more susceptible to diversion; (iii) the transaction structure, which helps mitigate transfer and convertibility risk; and (iv) the level of future flow debt to total liabilities and long-term funding.
NCBJ is the largest bank by total assets in the Jamaican banking system. 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.
Considering the amended outstanding debt size, the expected quarterly debt service coverage ratio (DSCR), calculated according to the transaction documents, is 41.3x maximum quarterly debt service. The calculation considers average quarterly flows through designated depository banks (DDBs) for the past three years and excludes 65% of flows from certain entities which have large levels of domestic flows and/or are considered more susceptible to diversion.
The transaction structure benefits from notice and acknowledgment agreements signed with 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.
The program's total outstanding future flow debt represents 3.35% of NCBJ's total liabilities. While NCBJ's future flow debt as a percentage of total liabilities is similar to that of many future flow programs in the region, the debt represents 100% of long-term funding, which is considerably higher.
The rating is sensitive to changes in the credit quality of NCBJ. A downgrade of NCBJ's 'B-' LC IDR could lead to a downgrade on the notes. In addition, severe reductions in coverage levels could also result in rating downgrades.
Additional information is available at 'www.fitchratings.com'.
--'Future Flow Securitization Rating Criteria' (
--'Global Structured Finance Rating Criteria' (
Future Flow Securitization Rating Criteria
Global Structured Finance Rating Criteria
Source: Fitch Ratings
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