Fitch Affirms Inter-American Investment Corporation at 'AAA'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the Inter-American Investment Corporation's (IIC) long-term Issuer Default Rating (IDR) at 'AAA'. The Rating Outlook is Stable. A full list of IIC's ratings follows at the end of this press release.

The IDRs and senior debt ratings have been affirmed because of the IIC's stable financial performance and risk profile.

KEY RATING DRIVERS

The affirmation and Stable Outlook reflect the following key rating factors:

--IIC has one of the highest equity/adjusted assets and paid-in/subscribed capital ratios among multilateral development banks (MDBs) rated 'AAA' by Fitch at 54.1% and 98.5%, respectively, as of end-September 2014. As a result, IIC's debt/equity ratio, which reached 82.0% at the same date, is low relative to its peers.

--Fitch estimates the weighted average rating (based on publicly available international credit ratings) of the corporation's loan portfolio was 'BB+' at end-September 2014. IIC's non-accrual loans/gross loans ratio tends to be higher and more volatile than other MDBs given its private-sector focus. Historically, non-accrual loans have been maintained at manageable levels even though almost one-third of its loans are extended directly to small and medium-sized corporations. Loan loss reserve coverage is sufficient and concentration risk is low.

--Despite a decline in the IIC's liquid assets/short-term debt ratio to 496.9% at end-September 2014 from 620% at year-end 2013 due to maturities of market debt in 2015, this ratio was in line with other highly rated MDBs. The IIC also has USD200 million in an undrawn committed credit facility with the Inter-American Development Bank (IaDB; rated 'AAA'/Outlook Stable) as well as USD381 million of additional undrawn credit facilities from other institutions.

--Although not subject to banking regulations, the IIC abides by its own prudential framework. Management carefully monitors capital adequacy, liquidity and credit risk through conservative risk-management policies based on self-imposed prudential ratios and limits.

--IIC's subscribed capital is held by 45 member countries, with the United States (rated 'AAA'/Outlook Stable) holding the largest share at 23.0%. In contrast with other MDBs, no callable capital has been subscribed by shareholders. Although the proportion of 'AAA' and 'AA' rated shareholders is lower than for other 'AAA' MDBs (35% of subscribed capital at end-September 2014), support is strong, as demonstrated by continuous capital increases since 2000 and a high level of paid-in capital. Its relationship with the IADB in terms of common shareholders and their boards of governors and directors, also demonstrate strong support from member states.

--The MDB has been able to operate without difficulty during successive periods of instability in the region due to its conservative operating policy and the member countries' support. Member countries have historically accorded preferred creditor treatment to IIC.

RATING SENSITIVITIES

As IIC's ratings are primarily driven by intrinsic factors, the Stable Outlook reflects Fitch's assessment IIC's credit profile will remain commensurate with its 'AAA' rating. The factors that could, individually or collectively, affect IIC's ratings are:

--A prolonged and significant decline in capitalisation related to asset losses, fast growth in operations or an increase in earnings volatility as well as a structural weakening of liquidity could be negative for IIC's ratings.

--A stress situation in a member country that significantly affects asset quality or results in transfer and convertibility restrictions would be negative for creditworthiness.

KEY ASSUMPTIONS

The ratings and Outlook are sensitive to a number of assumptions as follows:

--Fitch assumes that member countries, even if experiencing severe difficulties (such as Argentina, rated 'RD'), will continue to exempt IIC's private sector borrowers from any measures that may impact the transfer and/or convertibility of their debt service payments, should any member country decide to default selectively to their creditors.

--Fitch assumes that IIC will maintain its conservative risk management and governance polices.

Fitch affirms IIC's ratings as follows:

--Long-term IDR at 'AAA'; Outlook Stable;

--Short-term IDR at 'F1+';

--Senior unsecured certificates at 'AAA(mex)';

--Senior unsecured medium-term note program at 'AAA';

--Senior unsecured notes at 'AAA'.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Supranationals Rating Criteria', dated May 22, 2014.

Applicable Criteria and Related Research:

Supranationals Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748877

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=980144

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Contacts

Fitch Ratings
Primary Analyst
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Diego Alcazar
Director
+1-212-908-0396
or
Committee Chairperson
Eric Paget-Blanc
Managing Director
+33 1 4429 9133
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Diego Alcazar
Director
+1-212-908-0396
or
Committee Chairperson
Eric Paget-Blanc
Managing Director
+33 1 4429 9133
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com