Fitch Rates Banco Nacional de Costa Rica's Proposed $500MM Notes 'BB+(EXP)'

NEW YORK--()--Fitch Ratings has assigned Banco Nacional de Costa Rica's (BNCR) proposed senior unsecured notes an expected rating of 'BB+(EXP)'. The size of the issuance is expected to be USD500 million. The maturity and interest rate of the offering are not yet defined. The assignment of the final rating is contingent upon the receipt of final terms and documentation conforming to information already received.

The rating is aligned with BNCR's Foreign Currency Long-Term Issuer Default Rating (IDR) of 'BB+'/Negative Outlook. BNCR's Negative Outlook is also aligned with the sovereign Rating Outlook.

The notes would represent a new international 144A/Reg S issuance. The proceeds from the offering are expected to be used partly to repay BNCR's existing outstanding indebtedness, as well as to expand its infrastructure financing activities and to increase BNCR's liquidity profile. BNCR's ratings are not affected by the additional debt issuance.

KEY RATING DRIVERS

BNCR's IDRs and the expected issuance rating are support driven. Sovereign support for all state-owned banks in Costa Rica is explicit in the Organic Law of the National Banking System. According to this law, all unsubordinated liabilities of state-owned banks are fully guaranteed by the government of Costa Rica in the event of a bank's liquidation. This would not represent a direct sovereign guarantee of the notes; however, the notes would be included in the sovereign's general guarantee of BNCR's liabilities in the event of liquidation.

BNCR is the largest bank in the country with a dominant market position in several business lines. The bank's deposit base is stable and diversified, benefitting from the explicit sovereign guarantee as well as the extensive geographic coverage of its branch network. Bank funding is also favored by regulation which compels private banks to make compulsory deposits at state-owned banks.

RATING SENSITIVITIES

The rating assigned to the notes is sensitive to a change in the sovereign rating which currently has a Negative Outlook.

For further details on BNCR's Viability rating, its drivers and sensitivities, please refer to Fitch's Rating Action Commentary "Fitch Affirms Banco Nacional de Costa Rica's IDR at 'BB+'; Outlook Negative" dated Dec. 1, 2015.

Relevant Committee Date: Nov. 30, 2015.

Additional information is available on www.fitchratings.com

Related Research:

Banco Nacional de Costa Rica (Dec 21, 2015)

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

Metodologᅢᆳa de Calificaciones Nacionales (pub. 13 Dec 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=727099

Related Research

Banco Nacional de Costa Rica

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875935

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Contacts

Fitch Ratings
Primary Analyst
Mark Narron
Director
+1-212-612-7898
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Rolando Martinez
Director
+503 2516 6619
or
Committee Chairperson
Alejandro Garcia
+52 81 8399-9146
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Mark Narron
Director
+1-212-612-7898
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Rolando Martinez
Director
+503 2516 6619
or
Committee Chairperson
Alejandro Garcia
+52 81 8399-9146
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com