MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has today published Inversiones Atlantida, S.A.'s (Invatlan) Long-Term Issuer Default Ratings (IDRs) of 'B'. A full list of rating actions is at the end of this release.
KEY RATING DRIVERS
IDRs
Invatlan's IDRs reflect the financial profile of its main subsidiaries, mainly Banco Atlantida (Atlantida), rated 'A+(hon)' on the national scale by Fitch, which has demonstrated a sound financial performance throughout the economic cycle. The ratings also consider Invatlan's high operational integration with its operating subsidiaries, as well as the light restrictions on subsidiaries upstreaming liquidity to Invatlan. Invatlan's ratings also reflect the expected moderate levels of double leverage.
Invatlan's creditworthiness is aligned with its main operating subsidiary, Atlantida, since its status as a financial holding company creates a natural dependence on the dividend flows from its subsidiaries to meet its financial commitments. This is particularly relevant because of Invatlan's expected moderate levels of double leverage defined as equity investments in subsidiaries plus the holding company's intangibles, divided by the holdco's common equity.
Fitch expects Invatlan's double-leverage ratio to increase to 120% due to the holdco's future plans to issue USD125 million of debt. According to Fitch's criteria, a double-leverage ratio of 120% or below indicates a manageable level of debt service costs, hence supporting the equalization of Invatlan's creditworthiness to that of Atlantida.
The agency considers as positive for Invatlan that Honduran regulations do not establish restrictions to capital and liquidity fungibility. Thus, Invatlan's subsidiaries can pay dividends to their holdco or inject liquidity efficiently. Dividend flows from its subsidiaries are expected to be ample and more than sufficient to service the entity's debt issue.
Atlantida is the second largest bank in the country, with an important position in the corporate lending market. Its ample footprint helps serve clients nationwide and provides a solid base for expanding the bank's operations. Atlantida's financial performance is highly sensitive to Honduras' operating environment. The bank's ratings consider the pressured quality of its loan portfolio, solid local franchise, good operating profitability, low funding cost, adequate liquidity and sound capitalization.
RATING SENSITIVITIES
IDRs
Invatlan's IDRs will be downgraded by one notch if the company's double-leverage ratio is sustained above 120% once the debt issuance takes place.
Invatlan's creditworthiness will likely move in line with that of its main subsidiary, Atlantida. Although it is not Fitch's base case scenario, a downgrade could also take place due to a significant weakening of Atlantida's financial performance and company profile. This includes a deterioration of asset quality that negatively affects operating profitability and a significant weakening in the bank's capital position that leads to a reduction in dividend payments available to service Invatlan's debt.
The ratings published are as follows:
Inversiones Atlantida, S.A.
-- Long-Term Foreign Currency IDR of 'B'; Outlook Stable;
-- Short-Term Foreign Currency of 'B';
-- Long-Term Local Currency IDR of 'B'; Outlook Stable;
-- Short-Term Local Currency of 'B'.
Additional information is available on www.fitchratings.com
Applicable Criteria
Global Bank Rating Criteria (pub. 25 Nov 2016)
https://www.fitchratings.com/site/re/891051
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