Fitch Rates Banco Agropecuario's Loan Through Citibank 'A-(emr)'

MONTERREY, Mexico--()--Fitch Ratings has assigned a local currency long-term rating of 'A-(emr)' to a long-term senior unsecured loan (the loan) contracted by Peru's Banco Agropecuario (Agrobanco) through CITIBANK, N.A. in the amount of Peruvian Nuevos Soles (PEN) equivalent to USD45 million. This loan was disbursed on July 3, 2013 and matures on July 27, 2017 at a rate per annum equal to 9.50% in PEN.

The loan payment obligation is in PEN, payable in USD to an exchange rate defined at the same date of the payment with the option to pay with another currency. The subscript 'emr' was added to the rating of the local currency loan to reflect the embedded market risk of the exchange rate fluctuation between the PEN and the USD given that the loan is denominated in PEN while the settlement is in USD.

KEY RATING DRIVERS

Fitch's current long-term foreign currency Issuer Default Rating (IDR) for Agrobanco is 'BBB+' and its local currency IDR is 'A-', both with a Stable Outlook. The IDRs are in line with the Peruvian sovereign's ratings, as Fitch views Agrobanco as an integral and key part of the government's agricultural development policy. Therefore, support from the government should be forthcoming, if needed, to Agrobanco and any of its senior unsecured debt.

Fitch rates the loan at the same level as Agrobanco's LC IDR and Peru's country ceiling, as the debt is senior unsecured.

The loan ranks pari passu with all other of Abgrobanco's present and future unsecured and unsubordinated indebtedness, except for those obligations mandatorily preferred by law. In Fitch's opinion, the aforementioned legal disclosure is neutral to the current rating although, in the case of liquidation of the bank, it could affect the recovery prospects of different debt instruments based on the Peruvian Law. However, Fitch believes there is a low probability of such a scenario.

The proceeds of the loan can only be used to finance the growth and development of the Peruvian agricultural sector. Loan principal may not be repaid or prepaid in whole, except according to its scheduled amortization. In addition, the credit agreement includes a cross-default clause triggered upon Agrobanco's default on any other indebtedness in an aggregate amount of USD10 million or more.

Moreover, Agrobanco has agreed to comply with the following financial covenants:

--Maintain for each month during the term of the loan an Efficiency Ratio (operating expenses to total financial margin) of less than 65%;

--Maintain at all times a Local Currency Liquidity Ratio (Liquid Assets to short-term liabilities in PEN) equal to or greater than 10%;

--Maintain at all times a Loans Coverage Ratio (Total Non-Performing Loans to Total Loans) not to exceed 8%;

--Maintain a Risk Weighted Capital Adequacy Ratio (Regulatory Capital Ratio) of not less than 20%;

--Maintain at all times Loan Loss Reserve to Past Due Loans equal or greater than 175%.

Based on information at the end of March 2014, the bank meets these covenants. In Fitch's view, the violation of any of these covenants may result in an acceleration of the payments although, even under such event, Agrobanco should be able to repay this loan based on its own financial strength and/or provided the potential support from the Republic of Peru.

RATING SENSITIVITIES

As a fully state-owned financial institution, deeply integrated within the government, Agrobanco's creditworthiness and debt ratings are directly linked to those of the Republic of Peru. Hence, its ratings should move in line with any potential change in Peru's sovereign ratings.

For more information on the key rating drivers and the sensitivities of Agrobanco's ratings, please refer to the press release: 'Fitch Assigns 'BBB+' FC IDR to Peru's Banco Agropecuario (Agrobanco); Outlook Stable', dated Oct. 31, 2013, available at www.fitchratings.com.

Additional information is available on 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=848314

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Alejandro Tapia, +52 81 8399 9156
Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst
Mark Narron, +1 212-612-7898
Director
or
Committee Chairperson
Rene Medrano, +503 2516 6610
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Alejandro Tapia, +52 81 8399 9156
Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst
Mark Narron, +1 212-612-7898
Director
or
Committee Chairperson
Rene Medrano, +503 2516 6610
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com