CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'A-' rating to the $100 million series B notes issued by CIC Central American Card Receivables Limited. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release.
Credomatic International Corporation (CIC) is the exclusive issuing and acquiring partner of American Express (AmEx) in Central America. CIC Central American Card Receivables Limited is backed by future flows due from AmEx related to international merchant vouchers originating in Costa Rica, Guatemala, El Salvador, Honduras, Nicaragua, and, as of 2015, Panama. In October 2015, an amendment was executed to add CIC's AmEx acquiring receivables from Panama to the program. This followed an amendment to CIC's independent operating agreement (IOA) with AmEx which extended the IOA five years through 2025 and granted CIC exclusivity for acquiring AmEx cards in Panama.
Fitch's rating addresses timely payment of interest and principal on a quarterly basis.
KEY RATING DRIVERS
Strength of the Originator: CIC's investment grade rating reflects the support it would receive from its parent, Banco de Bogota (Bogota), and the strength of CIC's financial franchises in the region. The group is the regional leader in the credit card acquiring and issuing businesses, with strong operating franchises in Panama, Costa Rica and other Central American countries. Fitch assigns CIC a going concern assessment score of 'GC2'.
Dominant and Growing Franchise: CIC boasts a market leading and profitable regional credit card business that drives group banking activities. CIC's regional credit card issuing and acquiring volumes each grew 14% compound annual growth rate (CAGR) from 2010 - 2015. The addition of Panama to CIC's AmEx business line will further strengthen CIC's dominant market position in Central America.
Diversity of Flows by Country: In 2015, 68% of international AmEx vouchers came from Costa Rica, 10% from Guatemala, 8% from Nicaragua, and 6% each from El Salvador and Honduras. The addition of Panamanian receivables is expected to improve diversification by country. In 2016, CIC projects Panama to contribute 36% of flows and Costa Rica to account for 44%.
Level of Future Flow Debt: Combined debt under both merchant voucher future programs will represent approximately 6.1% of CIC's total liabilities and 37.2% of long-term funding upon issuance of the series B notes. When also considering Banco BAC San Jose's DPR future flow program, these ratios are approximately 7.8% and 47.4%, respectively. Fitch considers this level of future flow debt commensurate to the current ratings assigned to the transactions.
Low Sovereign/Diversion Risks: The structure mitigates certain sovereign risks by collecting cash flows offshore until collection of periodic debt service. Fitch believes diversion risk is mitigated by the acknowledgment and consent agreement obligating AmEx to make payments into a collection account controlled by the trustee.
Exclusive Agreement with AmEx: The transaction benefits from CIC's exclusive agreement to issue and acquire for AmEx in Central America. In 2015, CIC and AmEx extended the term of its agreement through year-end 2025 and authorized CIC to issue and exclusively acquire AmEx cards in Panama. Negatively, flows are not diversified by card company as collateral is limited to AmEx receivables.
RATING SENSITIVITIES
The transaction ratings could be sensitive to significant changes in the credit quality of CIC and its parent, Bogota, the credit quality of CIC's underlying subsidiaries, and to the rating of AmEx. While the transaction is sensitive to ratings of CIC, its parent, Bogota, and CIC's underlying subsidiaries, a one-notch downgrade to these ratings would not automatically result in a downgrade of the future flow ratings. A decrease in program flows that results in reduced debt service coverage levels could also result in rating downgrades. Transaction ratings may also be sensitive to the ratings of the relevant sovereign environments.
Fitch has assigned the following ratings:
CIC Central American Card Receivables Limited
--Series B notes 'A-'.
The Rating Outlook is Stable.
For more information on this rating action, see Fitch's new issue report 'CIC Central American Card Receivables Limited,' available shortly at www.fitchratings.com.
Additional information is available at www.fitchratings.com.
Sources of Information:
In addition to the sources of information identified in the master criteria, this action was additionally informed by information from CIC.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Future Flow Securitization Rating Criteria (pub. 12 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868191
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003553
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003553
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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