RATING DRIVERS

Supporting Factors:

• Stable and predictable revenue stream underpinned by firm long-term contracts with strategically important Jamaican entities
• NFE SPH’s underlying asset consists of a modern, efficient electricity and steam generating plant, with good operating efficiency
• Stable operating profits support comfortable debt servicing capacity
• Credit enhancements in the form of a parent company guarantee and reserve accounts also support the rating

Constraining Factors:

• Unproven track record of consistent plant performance
• High leverage of Parent can hamper timeliness of financial support, if needed

Rating Sensitivity Factors

Factors that could, individually or collectively lead to an improvement in the ratings and/ or outlook include:

• Successful operations of the CHP plant over the next two to three years, in accordance with design specifications and on time compliance with the PPA and SSA deliverables over the period.
• An improvement in the creditworthiness of the guarantor (NFE), sustained over 2 consecutive years
• 2 consecutive years of reported profit after tax of the Company, leading to an improvement in its financial position and TNW

Factors that could, individually or collectively lead to a lowering of the ratings and/or outlook include:

• Deterioration in the creditworthiness of the guarantor (NFE), thereby reducing its ability to honor its guarantee commitment to NFE SPH in a timely manner, if so required
• Breach of contract by the O&M counterparty, Caribbean Blue Skies Energy, that may have a negative impact on operations
• Any material litigation which may affect NFE or NFE SPH
• Breach of any of the bond covenants
• A material reduction in the CHP plant’s availability which would impair its ability to deliver output stipulated in the PPA and SSA
• Failure by NFE or NFE SPH to capitalize the principal reserve account, at the appropriate time
• Failure by Jamalco to resume full operations
• The inability of NFE SPH to refinance the bullet payment

COMPANY BACKGROUND

NFE South Power Holdings Limited (NFE SPH or the Company), a wholly owned subsidiary of New Fortress Energy Incorporated (NFE or the Parent)^[1], was established in 2016 to own and operate a new modern, energy-efficient combined heat and power (CHP) plant in Clarendon, Jamaica, which commenced commercial operations in the first quarter of 2020. The CHP plant is fuelled by natural gas, with the ability to run on diesel as a backup fuel source. It can generate up to 100 MW of electricity and approximately 50 MW equivalent of steam.

NFE SPH has in place long-term contracts to sell 100% of the electricity and steam produced by the CHP Plant for the next 18½ years to Jamaican counterparties. NFE SPH sells all electricity produced by the CHP Plant to the sole power distribution utility company in Jamaica, the Jamaica Public Service Company Limited (JPS), rated jmAA+ by CariCRIS, pursuant to a long-term Power Purchase Agreement (PPA). NFE SPH also sells all steam produced by the CHP Plant to the Jamalco bauxite refinery^[2] under a long-term Steam Supply Agreement (SSA) with its owners, General Alumina Jamaica Limited and Clarendon Alumina Production Limited (collectively known as Jamalco). Throughout 2020, the CHP Plant had the highest dispatch factor of 95% relative to all other Jamaican power generators. For the financial year ended December 2020, NFE SPH recorded total revenue of US $94.4 million and total assets stood at US $241.9 million as at that date.

As a start-up entity, NFE SPH financed the construction of its CHP Plant through a shareholder loan and borrowings from related parties. The Company is now seeking to put more appropriate long-term debt financing in place given the long-term nature of its assets and repay amounts due to its shareholders and related parties. As such, NFE SPH intends to issue a bond in the amount of US $285 million, the proceeds of which will be used as follows:

 ^[1] New Fortress Energy Incorporated, founded in 2014 in Delaware, USA, is a gas-to-power infrastructure business that focuses on converting existing power generation to run on natural gas, building new gas-fired power generation plants, operating downstream gas-to-power assets, and supplying such assets with natural gas. NFE is a publicly traded company on the NASDAQ exchange with a market capitalization of approximately US $8.3 billion, and is currently rated at BB- (stable outlook) by both Standard and Poor’s and Fitch, the equivalent rating of which is CariA- on the CariCRIS regional rating scale.

^[2] This refinery was damaged by fire in August 2021 and repairs have been ongoing with resumption of full operations expected in H1 2022.

Analytical Contacts:

Maxwell Gooding

Tel: 1-868-627-8879 Ext. 235

E-mail: mgooding@caricris.com

Keith Hamlet

Tel: 1-868-627-8879 Ext. 244

Mobile: 1-868-487-8356

E-mail: khamlet@caricris.com

Website: www.caricris.com

Email: info@caricris.com

Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable.  However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.  No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval.  CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product

CariCRIS assigns ‘good’ creditworthiness ratings to the proposed bond issue of up to US $285 million of New Fortress Energy South Power Holdings Limited

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Sage Power Limited – Withdrawal of Issue Credit Ratings

Caribbean Information & Credit Rating Services Limited (CariCRIS), the region’s credit rating agency, wishes to inform the public of the withdrawal of Sage Power Limited’s credit ratings and outlook for the US $285 million Fixed Rate Secured Bond issued and reported on by CariCRIS on July 16, 2021.

These ratings were withdrawn following CariCRIS’ receipt of notice in December 2021, informing that Sage Power Limited will no longer be issuing the instrument.  As a result, the ratings will not be kept under annual surveillance and as such there will be no further updates on these ratings.

December 29, 2021

Sage Power Limited – Withdrawal of Issue Credit Ratings

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CariCRIS reaffirms “good creditworthiness” ratings to the J $4.6 billion December 2027 bond issue of The Jamaica National Group Limited

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RATING DRIVERS

Strengths

• Fiscal consolidation continues despite COVID-19 pressures and other unanticipated shocks
• Comfortable and growing foreign currency reserves
• Good financial sector stability indicators
• Strong tourism fundamentals suggest robust post-COVID-19 rebound potential

Weaknesses

• High debt to GDP
• Uncertain economic recovery

Rating Sensitivity Factors 

Factors that could lead to an improvement in the Ratings and/ or Outlook:

• A decrease in the total public sector debt to below 120% of GDP
• A fiscal surplus above 3% of GDP sustained over 2 consecutive years

Factors that could lead to a lowering in the Ratings and/ or Outlook:

• Import cover below 12 weeks with no likely sources to increase reserves
• Delays in the construction of tourism-related investment projects scheduled for completion in 2022
• Derailment in any material way of the BERT plan

ABOUT THE SOVEREIGN

Barbados is the most easterly island of the Lesser Antilles in the Caribbean. The island is twenty-one (21) miles long and has a maximum width of fourteen (14) miles, covering a total area of 167 square miles. The island is relatively flat and rises gently to the central highland region known as Scotland District, with the high point being Mount Hillaby (1,120 ft above sea level). The land slopes in a series of terraces in the west and goes into an incline in the east. A large proportion of the island is circled by its ecologically important coral reefs. Erosion of limestone in the northeast has resulted in the formation of caves and gullies. The population of Barbados is 287,000 (2019 estimate) and is one of the world’s most densely populated islands making it susceptible to environmental impact pressures as it has a lower than world average biocapacity.

Barbados gained independence from the United Kingdom on 30 November 1966 and 55 years later became a Republic. The Head of State is Dame Sandra Mason and the Prime Minister is the Honourable Ms. Mia Mottley.

Historically, the economy of Barbados was dependent on sugarcane cultivation; however, from the 1980s it transitioned to tourism, financial services and manufacturing. More recently, offshore finance and information services have become important sectors and foreign exchange earners.

Analytical Contacts:

Stefan Fortuné

Tel: 1-868-627-8879 Ext. 228

E-mail: sfortune@caricris.com

Maxwell Gooding

Tel: 1-868-627-8879 Ext. 235

E-mail: mgooding@caricris.com

Website: www.caricris.com

Email: info@caricris.com

Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.

CariCRIS reaffirms the credit ratings of the Government of Barbados

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RATING DRIVERS

Supporting Factors

• Simple transaction structure, with effective credit enhancement built-in
• Legal and regulatory framework supporting the transaction provides adequate protection to investors
• Good credit quality of the securitised loans in the mortgage pool, notwithstanding some deterioration as expected
• Sound underwriting practices of TTMF, the originator of the mortgages within the pool

Constraining Factor

• Mortgage pool seasoning along with a challenging economic environment could increase default risk

Rating Sensitivity Factors

Factors that could, individually, or collectively lead to an improvement in the ratings and/or outlook include:

• An improvement in the loan portfolio quality, with an NPL ratio of lower than 5% and/or a return to delinquency levels of 2% – 4% within the underlying mortgage pool over the next 12-15 months

Factors that could, individually, or collectively lead to a lowering of the ratings and/or outlook include:

• Persistent delinquency levels of above 20% and/or NPL ratio of above 8% within the underlying mortgage pool leading to heightened extension and/or default risk over the next 12-15 months
• Deterioration in TTMF’s NPLs to Gross loans ratio of above 10.5% sustained for 2 financial periods

BACKGROUND

CMO 2019-01 is a structured finance debt instrument issued by the Home Mortgage Bank (HMB or The Bank) to securitise residential mortgage assets purchased from the Trinidad & Tobago Mortgage Finance Company Limited (TTMF or the Company) on the secondary market. CMO 2019-01 offers participation certificates in 9 tranches in the amount of TT $200 million as follows:

1. Series A – TT $25.0 million with an average life of 0.54 years at an initial coupon rate of 2.05%
2. Series B – TT $25.0 million with an average life of 1.71 years at an initial coupon rate of 3.05%
3. Series C – TT $25.0 million with an average life of 2.90 years at an initial coupon rate of 3.70%
4. Series D – TT $25.0 million with an average life of 4.09 years at an initial coupon rate of 4.05%
5. Series E – TT $25.0 million with an average life of 5.35 years at an initial coupon rate of 4.75%

6. Series F – TT $25.0 million with an average life of 6.72 years at an initial coupon rate of 5.20%

1. Series G – TT $25.0 million with an average life of 8.24 years at an initial coupon rate of 5.30%
2. Series H – TT $12.5 million with an average life of 9.77 years at an initial coupon rate of 5.65%
3. Series I – TT $12.5 million with an average life of 11.49 years at an initial coupon rate of 5.75%

The collateralised assets are held in Trust by TTMF and governed by the laws of the Republic of Trinidad & Tobago and established by a Declaration of Trust. The investment security has monthly coupon payments that are payable to all certificate holders and the principal for each tranche available for distribution (Series A to I) are being paid sequentially as the underlying mortgages are repaid. Thus, Series A was fully repaid before principal repayment started on Series B and so on. Certificates are structured to enable investors to participate in the acquisition and ownership of a pool of residential mortgages. Each Certificate represents an undivided beneficial ownership interest in the Mortgage Pool. The Bank has also issued 2 Tranches, T and R, that will not be available for distribution^[1]. As at the date of this report, Tranche A and B has been fully repaid^[2].

The distribution of CMO Certificates represents a diversification of the Bank’s funding tools, generating liquidity while managing the Bank’s gearing position^[3]. The purpose of the CMO, therefore, is to provide funding to HMB to acquire mortgage loans on the secondary market from Approved Mortgage Lenders and to meet the Bank’s corporate financing needs.

HMB, as Issuer of the security, has engaged TTMF as the Trustee and Administrator for the transaction. The Bank also performs the roles of Registrar and Paying Agent. The Issuer, HMB, is a related party to the Trustee and Administrator, TTMF, as both entities are subsidiaries of the National Insurance Board of Trinidad and Tobago (NIBTT). The appointed legal advisor for the transaction is the law firm of Pollonais, Blanc, de la Bastide & Jacelon.

This represented the third CMO issued by HMB, with the previous two successfully issued in 1999 and 2000 respectively. Subsequently, the bank issued a fourth CMO (CMO 2020-01) in March 2020^[4].

^[1] These are represented via Certificates issued to HMB by the Trustee on transfer of the Mortgage Pool.  Tranche T represents an interest only Tranche with a notional principal amount equivalent to 0.25% per annum paid monthly on the Aggregate Unpaid Principal Balance. It is structured to meet the Trust’s obligations to its Trustee at the end of each Due Period.  Tranche R is payable to HMB and will be utilised as part of its general working capital cash flows.  It represents monthly surplus receipts from the Mortgage Pool after payment to all Certificate Holders and the Trustee.  Surplus receipts are derived from the interest rate differential between the Mortgage Pool Rate and the interest rate payable on the Certificates and the principal and interest payments from the over-collateralisation of the Mortgage Pool.

Analytical Contacts:

Nadia Sanchez

Tel: 1-868-627-8879 Ext. 229

E-mail: nsanchez@caricris.com

Anelia Oudit

Tel: 1-868-627-8879 Ext. 226

Mobile: 1-868-487-8364

E-mail: aoudit@caricris.com

Website: www.caricris.com

E-mail: info@caricris.com

Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable.  However, CariCRIS does not guarantee the accuracy,adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.  No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval.  CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.

CariCRIS reaffirms its overall ratings for the TT $200 million Collateralised Mortgage Obligation of Home Mortgage Bank (HMB CMO 2019-01)

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RATING DRIVERS

 Supporting Factors:

• Strong competitive position in property management supported a diversified and resilient real estate portfolio
• Continued high occupancy levels support revenue growth, while ‘business interruption’ insurance reduces the risk of lower income from property damage
• Financial performance negatively impacted by COVID-19 pandemic, as expected with a slight rebound in the 2^nd quarter of 2021
• Adequate liquidity and debt servicing capability supported by sufficient cash balances and sizeable portfolio of marketable assets
• Seasoned management team alongside a strong board of directors

Constraining Factors:

• Continued high reliance on dividend income from associated companies
• Challenging economic conditions in Jamaica present significant downside risks to PanJam’s financial operations

 Rating Sensitivity Factors:

Factors that can lead to an improvement in the ratings and/or outlook include:

•  An improvement in the ratings of the Government of Jamaica

Factors that can lead to a lowering of the ratings and/or outlook include:

•  Fall in occupancy below the break-even level of 50%
• Continued economic uncertainty leading to ongoing losses in investment income and a pause on ongoing construction projects which can result in a fall in total operating revenue by over 65%
• A significant decline of 60% or greater in SGJL’s dividend income.
• A sustained effective DSCR of less than 1.5 times over a 2-year period

COMPANY BACKGROUND

PanJam Investment Limited (PanJam or the Company) is an investment holding company, incorporated and domiciled in Jamaica and listed on the Jamaica Stock Exchange (JSE).  Jamaica Property Company Limited (Jamaica Property) was formed in 1964 by Mr. Cecil Facey and the Facey family, with a focus on real estate development in Kingston.  During that same year, Pan-Jamaican Investment Trust Limited (PanJam) was formed by Mr. Clinton Hart, with the dual purpose of investing in a wide range of Jamaican businesses and providing ordinary Jamaicans with the ability to participate in those investments.  In 1965, PanJam was listed on the Kingston (Jamaica) Stock Exchange and raised £200,000 through a public offering.  In 1966, Jamaica Property became a wholly-owned subsidiary of PanJam and Mr. Maurice Facey became its Managing Director and eventually its Chairman.  The merged entity embarked upon the development of high-rise commercial and residential properties which included: the Air Jamaica Building in downtown Kingston, the Imperial Life Building on Knutsford Boulevard, and the Abbey Court Apartments on Hope Road.

In the 1980s, PanJam began diversifying its portfolio and invested in the manufacturing and trading industry with the acquisition of Wherry Wharf.  The Company also expanded its investments into the tourism and export markets with the acquisition of Sans Souci Hotel and Resort and Jamaica Floral Exports, as well as a controlling interest in Scott’s Preserves Limited.  During this period PanJam also made investments in the financial services industry with the establishment of First Life Insurance Company and the acquisition of a 20% stake in Pan Caribbean Merchant Bank.  These two transactions have since evolved, through a series of strategic restructurings, into a 30.2% holding of Sagicor Group Jamaica Limited (SGJL), one of the Company’s largest investment holdings as at September 30, 2021. To date, PanJam’ executives inclusive of the Chief Executive Officer (CEO) and Deputy CEO have an average tenure of 17 years at PanJam.

PanJam engages in a wide range of real estate activities, takes actively managed positions in public and private companies, and trades equities and fixed income assets for its proprietary portfolio.  The Company’s revenue consists mainly of rental income and management fees from its property holdings; this accounted for 80.1% of total revenue over the 2018-2020 period.  PanJam also derives income from dividends, interest income, and other fee income from its subsidiaries (Table 1) and other financial investments. 

Analytical Contacts:

Jeffrey James

Tel: 1-868-627-8879 Ext. 236
E-mail: jjames@caricris.com

 Anelia Oudit

Tel: 1-868-627-8879 Ext. 226
Mobile: 1-868-487-8364

E-mail: aoudit@caricris.com

 Website: www.caricris.com

Email: info@caricris.com

Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.