RATING DRIVERS

Supporting Factors

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

Constraining Factor

• Mortgage pool seasoning could increase default risk

Rating Sensitivity Factors

Factor that could, individually, or collectively lead to an improvement of the ratings and/ or Outlook include:

• An improvement in the loan portfolio quality, with an NPL ratio of lower than 5% and/ or a delinquency ratio of less than 7.5%, led by the recovery of delinquent mortgages by TTMF

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

• Further deterioration in the mortgage pool quality, with an NPL of above 7.5% and/or delinquency of above 20%
• Deterioration in TTMF’s NPLs to Gross loans ratio of above 10.5% sustained for 2 financial periods

CMO 2020-01 is a structured finance debt instrument created by the Home Mortgage Bank (HMB or the Bank). The product was created to securitise residential mortgage assets purchased from the Trinidad Tobago Mortgage Finance Company Limited (TTMF) on the secondary mortgage market. CMO 2020-01 offered participation certificates in 7 tranches in the amount of TT $300 million as follows:

Series A – TT $25.0 million with an average life of 0.50 years at an initial coupon rate of 2.15%

Series B – TT $25.0 million with an average life of 1.54 years at an initial coupon rate of 3.60%

Series C – TT $25.0 million with an average life of 2.56 years at an initial coupon rate of 3.80%

Series D – TT $50.0 million with an average life of 4.11 years at an initial coupon rate of 4.25%

Series E – TT $50.0 million with an average life of 6.32 years at an initial coupon rate of 5.00%

Series F – TT $25.0 million with an average life of 8.30 years at an initial coupon rate of 5.50%

Series G – TT $100.0 million with an average life of 7.12 years at an initial coupon rate of 5.25%

COMPANY BACKGROUND

The collateralised mortgages 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 payable to all certificate holders. The certificates were 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 principal amounts of each tranche available for distribution (Series A to G) are being repaid sequentially from all scheduled payments during an established repayment window. The final principal payment is expected to coincide with the maturity of each respective tranche. Thus, Series A will be fully repaid before principal repayment starts on Series B and so on. However, when unscheduled payments (prepayments, lumpsum payments and payoffs) are received, these payments will be applied in reverse order from Tranche G to Tranche A. Thus, should Series G be repaid from unscheduled payments, further prepayments will be applied to Series F and so on. The Bank also issued 3 additional Series; T1, T2 and R that will not be available for distribution[1].

The distribution of CMO Certificates represents a diversification within the Bank’s funding tools, generating liquidity while managing the Bank’s gearing position. The CMO provides funding to HMB to acquire mortgage loans on the secondary market from Approved Mortgage Lenders and to meet the Bank’s corporate financing needs. Furthermore, CMO issues by HMB also serve to develop the local capital market and the secondary mortgage market in particular, consistent with the Bank’s mission, “to facilitate the growth and development of the housing finance market by the maintenance of a secondary mortgage market funded by capital market activities.”

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 advisers for the transaction is the law firm of Pollonais, Blanc, de la Bastide & Jacelon.

This is the fourth CMO issued and initiated by HMB, with the first 2 successfully issued in 1999 and 2000. The third (CMO 2019-01) was issued in early 2019 and has a balance of TT $2.80 million available for distribution as at July 2021. CMO 2019-01 was rated by CariCRIS and carries an overall rating of CariA+ (SO). CMO 2020-01, is similar in structure to CMO 2019-01, with minor adjustments that serve to improve the risk/ return profile and credit enhancements to support its stability. As at July 31, 2021, CMO 2020-01 has a balance of TT $38.69 million available for distribution.

Analytical Contacts:

Kathryn Budhooram

Tel: 1-868-627-8879 Ext. 227

E-mail: kbudhooram@caricris.com

Keith Hamlet

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

E-mail: khamlet@caricris.com 

Website: 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.

[1] Fully repaid

RATING DRIVERS

Supporting Factors:

• Good asset quality underpinned by a moderately diversified investment portfolio
• Strengthened funding profile characterized by low funding costs and comfortable capitalization
• Continued good financial performance despite reduced profitability, relative to prior year which included the positive impact of the sale of a portfolio asset
• Adequate policies and procedures, enhanced by the implementation of an Enterprise Risk Management Framework

Constraining Factors:

• Market reach capabilities limited by their small though growing asset base
• Uncertainty in the global economic environment which affects PIL’s major operating countries

Rating Sensitivity Factors:

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

• An improvement in the GOJ’s credit rating over the next 12-15 months
• A material reduction in gearing ratio to the order of less than 4 times for 3 consecutive years

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

• Economic environment negatively impacting revenue streams leading to losses.
• A systemic increase in liquidity pressures in the environment leading to funding withdrawals from large institutional investors
• Cost to Income ratio weakens to 75% and over
• A deterioration in the GOJ’s credit rating over the next 12-15 months

COMPANY BACKGROUND

PROVEN Investments Limited (PIL) was incorporated in February 2010 as an International Business Company (IBC) in Saint Lucia. Its assets and operations are managed by PROVEN Management Limited (PML), the Investment Manager, whose registered office is in Kingston, Jamaica. In July 2011, PIL was listed on the Jamaica Stock Exchange (JSE).  The Company’s primary activities include the holding of investments in portfolio companies; consisting primarily of core holdings in the Wealth Management & Banking Sector, Real estate and other opportunistic investments spanning traditional and alternative asset classes. The Wealth Management and Banking segment maintains a relatively large exposure to tradeable securities for investment purposes while also holding managing off balance sheet assets under management (AUM) on behalf of its clients for a fee. PIL primary objective is to acquire fairly priced businesses, create value and thereafter extract value through either cashflows to PIL or a direct exit of the investment. In this regard, PIL is structured as follows:

  Source: Proven Investments Limited

The ordinary shares of the Company are widely held, with the top 10 shareholders accounting for 23.1% of issued and outstanding ordinary shares as at March 31^st 2021.  In addition to the ordinary shares, the Company also has two classes of preference shares in issue, namely: (1) Manager’s Preference Shares – 10,000 in issue that entitles the holders to 25% of the profits and gains of the Company in each financial year in excess of an Annual Earnings Hurdle; (2) 300,000,000 8.25% authorized Cumulative Redeemable Preference Shares and (3) 700,000,000 authorized Cumulative Redeemable Preference Shares.  The latter preference shares carry no voting rights at a General Meeting. The holders of the 10,000 Managers’ Preference Shares account for 50% of the voting rights in PIL on matters other than the Investment Manager’s fees.  These shares are held by MPS Holding Limited (MPS), an investment holding company incorporated in St. Lucia as an IBC. This structure is typical and similar to a Fund structure and mirrors a General Partner arrangement of the private equity asset manager, with a management fee being distributed to the manager of the portfolio.

PROVEN’s investment strategy has evolved over its 10-year existence, where initially the focus was primarily an international diversified carry trade strategy, however overtime this has transitioned.  The three (3) main segments under which PROVEN creates value for its shareholders are (i) Banking and Wealth management, (ii) Real estate and (iii) opportunistic investments, capturing areas such as manufacturing and tourism. Most of the portfolio’s assets still lie in the Wealth Management & Banking segment due to the Company’s core competence and expertise in this sector. As it pertains to real estate, PIL develops, sells, buys and holds commercial and residential real estate assets for both income and capital appreciation. PIL’s investments in the Banking and Wealth Division are regarded as quasi permanent, while other investments typically target a 3-5 year holding period. The investments are typically in the English-speaking Caribbean, have strong cashflow generating ability and are operated by experienced entrepreneurs and/or management teams. PIL manages its portfolio actively and drives strategic direction of its portfolio companies as a means of creating shareholder value and managing risk. As a part of the due diligence process, all investment decisions are vetted by an investment management committee which determines the viability of opportunities presented to the firm.

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.

RATING DRIVERS

Supporting Factors:

• Strategically important entity to the domestic energy sector and the Government of Trinidad and Tobago
• Improvement in gas supply from continued exploration and development activity
• Continued low gearing and good debt protection metrics, though reduced from prior years

Constraining Factors:

• Highly vulnerable to a changing energy landscape characterised by volatile energy prices
• Reduced earnings and profitability due to lower energy commodity prices and gas production

Rating Sensitivity Factors

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

• An improvement in the CariCRIS credit rating of the GoRTT
• An increase of gross margins to 25% for 2 consecutive years
• An increase in the DSCR to >3 times for 2 consecutive years leading to an improvement in the ability to service its amortised debt payments

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

• Debt / EBITDA increases to >5 times
• A fall in the effective DSCR to <1 times for 2 consecutive years leading to a deterioration in the ability to service its amortised debt payments
• A significant decline in international prices of ammonia/ methanol, leading to a material decline in revenue
• Deterioration in the CariCRIS credit rating of the GoRTT

COMPANY BACKGROUND

NGC is a limited liability company wholly owned by the Government of the Republic of Trinidad and Tobago (GoRTT) and is designated as the government’s prime mover in the natural gas sector. Since its establishment in August 1975, NGC has played a leading and key role in the development of Trinidad and Tobago’s natural gas industry. With over 45 years’ experience, the NGC Group has a diversified portfolio of business interests, which can be placed under the following three major categories:

• Gas transportation and compression – NGC is the sole transmitter and distributor of natural gas to the natural gas-based energy industry as well as manufacturing concerns throughout the country. NGC’s role was augmented in 1982 by the collection and compression of low-pressure offshore gas from the Teak and Poui platforms.

• Merchant gas trading – Since 2004, as the sole purchaser and seller of natural gas, NGC has been purchasing natural gas from four major suppliers (British Petroleum Trinidad and Tobago (bpTT), Shell Trinidad Limited, BHP Billiton, and EOG Resources and supplying same to consumers in the heavy industrial sector as well as in the light industrial/commercial sector located at the Point Lisas Industrial Estate.

• Investment holdings – NGC has strategic equity investments in natural gas liquids (NGLs) and liquefied natural gas (LNG) companies, and subsidiary and associated companies operating in different segments of the local natural gas value chain including port and site infrastructure development, marine infrastructure management and helicopter services.

In the last decade, NGC has increased its strategic positioning within the natural gas value-chain in Trinidad and Tobago while supporting the global clean energy agenda. As part of its repositioning within the value chain, the Group has made investments in the upstream, midstream, downstream and commodity trading. Furthermore, one of NGC’s primary evolving objectives is to lead the change in the domestic industrial sector to support the Green Agenda via investments in solar energy projects and work on the production of green hydrogen.

Analytical Contacts:

Musa Abdullah

Tel: 1-868-627-8879 Ext. 233

E-mail: mabdullah@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

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.

RATING DRIVERS

Supporting Factors

• Strong brand and long history in the Jamaican securities industry and an emerging financial services player in the Caribbean region
• Well-diversified asset portfolio with good asset quality
• Strong financial performance in FY2021 bolstered by the Group’s investment in SFC
• Comfortable capitalization, reflected in good capital adequacy ratios
• Robust governance structure and risk management practices

Constraining Factors

• Funding base characterized by moderate concentration in repurchase agreement (repo) instruments which has contributed to asset/liability mismatches and high gearing
• Sluggish economic conditions could constrain growth

Rating Sensitivity Factors

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

• Improvement in the Government of Jamaica’s (GOJ) credit rating, leading to an improved overall credit risk profile of the GOJ
• Growth in PAT of 10% for 2 consecutive years
• Material improvements in the Group’s market share in its key business segments

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

• Deterioration of the NPLs to Gross loans ratio to 8% or more
• Deterioration of the CAR of any of the Group’s subsidiaries to below the country specific regulatory requirements
• Cost to Income ratio weakens to 75% and over

COMPANY BACKGROUND

JMMB Group Limited (JMMBGL or the Group) is a financial services Group incorporated and domiciled in Jamaica and listed on the Stock Exchanges of Jamaica and Trinidad and Tobago.  The Group was initially established as Jamaica Money Market Brokers Limited (JMMB) in 1992 as a joint venture among the National Development Bank, Mutual Security Bank, Jamaica Producers Group Limited, Jamaica Venture Fund and Antrim Limited.  JMMB has been a pioneer in the Jamaican securities industry as the first exclusive money market broker and dealer. Over the ensuing years, the Group’s operations have expanded and evolved to include 19 subsidiaries and 1 associated company in Jamaica, Trinidad and Tobago (T&T) and the Dominican Republic (Chart 1). In April 2015, a holding company, JMMBGL was formed, under an approved Scheme of Arrangement, as the parent of the Group of companies including JMMB. As at June 2021, JMMBGL’s 2 largest shareholders were Proven Investments Limited^[1] (20.01%) and Trustees JMMB ESOP (9.34%).

The Group offers its products and services through 5 main business lines which include investment management^[2], banking, insurance brokerage, remittances, and other related services, to 386,000 clients^[3] in the 3 countries that it serves. JMMBGL’s total assets as at March 2021 stood at J $506.2 billion^[4] and total revenue for the period ended March 2021 was J $22.6 billion. The Group’s largest subsidiary, Jamaica Money Market Brokers Limited domiciled in Jamaica, accounted for approximately 48% and 42%^[5] of JMMBGL’s total assets and revenue respectively. Over the past 8 years, the Group has focused on regional expansion and diversification of its business lines through acquisitions and the development of strategic partnerships. JMMBGL, over the next 5 years, will seek to standardise, centralise and integrate its operations across all entities within the Group, which will serve to improve its operational efficiency. Further, the Group also intends to grow its banking business line regionally with a view to enhancing the diversification of its income and reducing the cost of its funding.

 ^[1] Proven Investments Limited is a public investment firm. The Company’s primary activities include the holding of tradeable securities for investment purposes and holding private equity investments in small and medium sized companies throughout the region with significant potential for medium term growth.

^[2] Investment management includes asset management services i.e. on and off-balance sheet solutions, treasury, cambio, fixed income and equities trading and capital market services.  On-balance sheet solutions include mutual funds and off-balance sheet solutions include collective investment schemes, pension funds and unit trusts.

^[3] As at March 2021

^[4] Total assets have been adjusted to exclude intangible assets, unrealized gains/(losses) and contingencies.

^[5] On a consolidated basis. 

Analytical Contacts:

Kathryn Budhooram

Tel: 1-868-627-8879 Ext. 227

E-mail: kbudhooram@caricris.com

Keith Hamlet

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

E-mail: khamlet@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.

RATING DRIVERS

Supporting Factors

• Healthy capitalization and good liquidity, supported by low risk retention
• Continued profitable operations in FY2021
• Moderately diverse investment portfolio with good asset quality
• Good operational efficiency and adequate risk management measures support operations

Constraining Factors

• Performance of the Trinidad & Tobago economy may impact TRINRE’s profitability

Rating Sensitivity Factors

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

• An improvement in financial performance over 10% in the next year
• Further diversification of revenue sources contributing to additional income
• An improvement in the ratings assigned to the T&T sovereign

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

• A deterioration of the Company’s capital adequacy ratio to 150% or lower on a sustained basis for at least 6 months under normal conditions
• A lowering of the ratings assigned to the T&T sovereign
• A lowering of the ratings of one of TRINRE’s main reinsurers

COMPANY BACKGROUND

Reinsurance Company of Trinidad and Tobago Limited was incorporated on July 3, 1975 by the Government of the Republic of Trinidad and Tobago (GORTT) which owned 60% of the Company and the remaining 40% held by various local insurance companies.  In 2001, Investment Managers Limited (IML), a private investment holding company, acquired the majority shareholding of Reinsurance Company of Trinidad and Tobago and in 2015, changed its name to TRINRE Insurance Company Limited (TRINRE or the Company).

Currently, TRINRE offers a range of general insurance products and services that provide both individual and institutional coverage for: Motor, Property, Marine, Public/Product Liability, Engineering, Energy, Events, SMB^[1] and Workmen’s Compensation. The Company also offers a range of Group Life insurance products for Employers and Lending Institutions. Additionally, the Company offers a range of Bonds to provide financial security for project contracts. These products and services are offered through its branch network of five outlets^[2], agencies and brokers.

In February 2020, the Company obtained a license to operate an insurance company in Guyana, through its wholly owned subsidiary, Premier Insurance Company Limited (Premier). Premier commenced operations in January 2021 with a view to providing insurance and financial support to clients as Guyana continues to establish itself as an emerging global business destination.

 ^[1] Small and Medium Businesses: Retailers, Professional Offices, Trade & Service Companies and Hospitality businesses.

^[2] Head Office at Edward Street, Port of Spain, other outlets are located at: San Fernando, Arima, Chaguanas and Tobago.

 Analytical Contacts:

 Keith Hamlet

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

E-mail: khamlet@caricris.com

Maxwell Gooding

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

E-mail: mgooding@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.

RATING DRIVERS

Supporting Factors

• Strong market position as a leading plastic bottle manufacturer in Jamaica
• Good operating efficiency underpinned by strong asset maintenance policies and practices

Constraining Factors

• Deteriorating financial performance
• High intercompany balances have limited cash flow accumulation
• Downside risks associated with significant sovereign risk exposure to Jamaica
• Increasing trend to limit the use of single-use plastic bottles represents an industry risk

Rating Sensitivity Factors

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

• An increase in PAT of above 10% for 2 consecutive years
• Improvement of the sovereign risk profile of Jamaica
• 2 consecutive years or net reductions in intercompany balances by 10% or more, leading to improved cash flows and cash balances for Poly Pet

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

• A greater than 10% decline in operating revenue for 2 consecutive years
• A decline in interest cover to below 2 times
• A net increase in intercompany balances by 5% over the next 12 months
• A deterioration in the Company’s debt/ TNW ratio to more than 2 times
• Breach of covenants stipulated in the final term sheet/prospectus for the bond offering
• Inability to raise capital given the likelihood that the bond’s principal at maturity would need to be refinanced in 2025
• Changes in environmental laws and regulations towards reducing plastic use in Jamaica
• Deterioration in the sovereign risk profile of Jamaica
• Material deviation of Poly Pet’s audited financial accounts for June 2020 from management accounts presented, resulting in lower profitability and cash flow adequacy metrics

COMPANY BACKGROUND

Poly Pet Company Limited (Poly Pet or the Company) is privately-owned, limited liability, manufacturing company founded in 2006 and located in Kingston, Jamaica. The Company’s primary manufacturing operations involve the production of high-density polyethylene (HDPE)^[1] and polyethylene terephthalate (PET)^[2] bottles of various sizes for household, beverage, and industrial use. The Company is owned by Anthony Brown (40%), Shane Brown (40%) (the current Chief Executive Officer), and Tamara Phang (20%).

The Company holds a market share of approximately 70% of the plastic bottle manufacturing industry in Jamaica. Over 90% of the Company’s customers are located across Jamaica, with a small distribution operation located in Barbados. Additionally, Poly Pet has successfully aligned itself with both local and international companies to provide complete packaging solutions including labels, boxes, and bottle caps. The Company is able also to design and manufacture bottles for its customers based on their unique specifications.

In December 2020, the Company issued a 5-year J $1 billion senior secured bond. To date, the Company has received J $800 million from investors. The initial proceeds of the bond were mainly used to refinance its bank debt under more flexible terms and to fund additional Working Capital requirements (Table 1). The balance of J $200 million is expected to be sold to additional investors in the 2^nd half of 2021 and will be used to purchase new machinery and equipment to expand the Company’s product range and provide further working capital support.

Analytical Contacts:

Keith Hamlet

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

E-mail: khamlet@caricris.com

 Maxwell Gooding

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

E-mail: mgooding@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.

RATING DRIVERS

Supporting Factors

• Dominant presence in the Jamaican financial services sector
• Sustained profitability notwithstanding lowered revenue and deterioration in asset quality due to the effects of COVID-19
• Funding base characterized by continued growth and low cost
• Comfortable capitalization reflected in good coverage of total assets
• Sound risk management practices continue to support strategic objectives

Constraining Factors

• High reliance on the performance of the Jamaican economy

Rating Sensitivity Factors

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

• Improvement in the GOJ’s credit rating leading to an improved credit risk profile of NCBJ

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

• The occurrence of any factors that may contribute to the deterioration of the CAR below the 12.5% minimum requirement for the Bank
• The deterioration of the gross NPLs to gross loans ratio to 7.5% or more leading to reduced earnings and increased provisioning, thereby affecting profitability

COMPANY BACKGROUND

Established in 1837, the Colonial Bank of London was renamed the National Commercial Bank Jamaica Limited (NCBJ or the Bank) in 1977. NCBJ has 8 active subsidiaries that operate in the commercial banking and securities industries. The Bank offers an extensive product and service range including commercial banking, stock brokerage, wealth & asset management, and pension fund management & administration.

In March 2017, NCBJ and its subsidiaries completed its corporate restructuring forming a holding company called NCB Financial Group Limited (NCBFG or the Group). This re-organisation created a corporate structure that better facilitates the Group’s regional aspiration of becoming a leading financial services conglomerate in the Caribbean. As a result of the new structure, NCBJ is now a wholly-owned subsidiary of NCBFG. NCBFG is majority-owned by AIC (Barbados) Limited (51.73% as at June 2021).

In September 2020, NCBJ disposed of 100% of the insurance and annuities portfolio of NCB Insurance Company Limited (NCBIC), its last remaining subsidiary in the insurance industry, which was acquired by Guardian Holdings Limited (GHL), a subsidiary of NCBFG. The execution of this transaction allows NCBFG to streamline its insurance business segment and extract synergies and efficiencies where possible.

Analytical Contacts:

Megan Dass

Tel: 1-868-627-8879 Ext. 239

E-mail: mdass@caricris.com

Keith Hamlet

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

Cell: 1-868-487-8356

E-mail: khamlet@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.

RATING DRIVERS

Supporting Factors

• Dominant regional financial services player, with strong presence in the Jamaica banking and securities industry and regional insurance industry
• Comfortable capitalization reflected in good coverage of total assets
• Sustained financial performance underpinned by diverse and resilient income streams
• Growing assets base, though challenged by some deterioration in asset quality
• Robust risk infrastructure and focus on technology supports strategic planning and the achievement of business objectives

Constraining Factors

• Deteriorating economic conditions in operating territories could constrain growth

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

• Improvement in the credit ratings of the Government of Jamaica (GoJ) and/or the Government of the Republic of Trinidad and Tobago (GoRTT) leading to an improved sovereign risk profile

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

• Deterioration of any of the subsidiaries’ CAR below the country specific regulatory requirements
• Deterioration in the credit ratings of the Government of Jamaica (GoJ) and/or the Government of the Republic of Trinidad and Tobago (GoRTT) leading to a worsened sovereign risk profile

COMPANY BACKGROUND

NCB Financial Group Limited (NCBFG or the Group), was incorporated in April 2016 and is a financial holding company for National Commercial Bank Jamaica Limited (NCBJ or the Bank) and to facilitate the Group’s regional expansion initiatives. NCBFG currently comprises NCBJ and NCB Global Holdings (NCBGH) Limited as two wholly owned subsidiaries, as well as Clarien Group, a Bermuda-based banking, investment, and trust services financial group. NCBFG acquired 50.1% of Clarien in December 2017^[1] and its subsidiary, NCBGH, acquired the majority shareholding (61.77%) of Guardian Holdings Limited (GHL or the Guardian Group) and its subsidiaries.

NCBFG is listed on the Jamaica and Trinidad and Tobago stock exchanges and its top 3 shareholders as at August 31, 2021 are AIC (Barbados) Limited (52.11%), MF&G Asset Management (5.05%) and Sagicor PIF Equity Fund (3.21%). The remaining 41.9% of the shares are distributed amongst other individual and institutional shareholders. NCBJ, the main operating subsidiary, currently has 8 subsidiaries that operate in the commercial banking and securities industries. The Bank offers an extensive range of products and services including commercial banking, stock brokerage, wealth and asset management, and pension fund management and administration.

^[1] The other shareholders of Clarien include Edmund Gibbons Limited and Portland Private Equity Limited (PPE)

Analytical Contacts:

Khadine Tavares

Tel: 1-876-618-8800 Ext. 9813

E-mail: ktavares@caricris.com

Keith Hamlet

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

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.

RATING DRIVERS

Supporting Factors

• Good financial performance despite a challenging operating environment
• Strong capitalization, well above that of its peers
• Good liquidity supported by a diversified funding base
• Prudent risk management strategies

Constraining Factors

• Credit loan portfolio quality adversely impacted by the COVID-19 pandemic
• Prevailing economic conditions could negatively impact financial performance

Rating Sensitivity Factors

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

• An improvement in the credit rating of the sovereign over the next 12-15 months
• Improvement in the Bank’s interest spread to > 3%, sustained over a 3-year period
• NPLs/Gross loans improve to 5% or below over the next 12-15 months

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

• A deterioration in the credit rating of the sovereign over the next 12-15 months
• A sustained increase in the cost of funds by 100 bps or greater over the next 12-15 months
• NPL’s >8% over the next 12-15 months
• A deterioration of the total earning assets/ total interest-bearing liabilities ratio to < 1 time

COMPANY BACKGROUND

Home Mortgage Bank (HMB) was established in the Republic of Trinidad and Tobago (T&T) under the Home Mortgage Bank Act of 1985 and commenced business in October 1986. HMB is 100% owned by the National Insurance Board of Trinidad and Tobago (NIBTT)^[1].

HMB’s principal business activities include the trading of residential mortgages originated by primary mortgage lenders^[2] and commercial lending. The Bank’s loan product offerings include loans for land acquisition for commercial purposes, bridge financing, commercial mortgage loans, project financing, and Public/Private Sector Partnerships (PPP)^[3]. Its Mortgage-Backed securities include Collateralized Mortgage Obligations (CMOs), the Mortgage Participation Fund (MPF) and the Samaan Tree Fund (STF). The mutual funds established by HMB are backed by a segregated pool of residential mortgages. The Bank also issues taxable and tax-exempt Bonds. The Bank is a non-deposit taking institution and derives most of its funding from the issuance of medium-term and long-term bonds; additional funding is also provided through inflows from the MPF, STF and the CMOs. HMB currently has three 100%-owned subsidiaries, Tobago Fairways Villas Limited, Tobago Plantation House Limited, and Tobago Fairways Management Limited. These subsidiaries are engaged primarily in real estate development.

On August 6, 2021, the Board of the National Insurance Board of Trinidad and Tobago (“NIBTT”), as well as the Boards of the Trinidad and Tobago Mortgage Finance Company Limited (“TTMF”) and Home Mortgage Bank (“HMB”) formally approved the merger of TTMF and HMB. A team of advisors led by PricewaterhouseCoopers Advisory Services Limited (“PwC”) is providing implementation support for the merger. The approved method for the merger is a Distribution in Specie, whereby all assets and liabilities of the liquidated HMB will be transferred to TTMF.

^[1] Previously 0.6% of HMB’s shares were held by British American Insurance Company (Trinidad) Limited, but NIBTT acquired these residual shares in 2017.

^[2] Include the local commercial banks, non-bank mortgage institutions and credit unions.

^[3] For 2019, the portfolio comprised project financing, commercial facilities for land development and construction of multi and single-family homes for re-sale. In addition, to their primary commercial mortgage portfolio, HMB continues to purchase secondary mortgages from TTMF.

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

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.

RATING DRIVERS

Supporting Factors

• High asset quality of the NIF’s underlying assets
• Cash flow adequacy though down in 2020 continues to be supported by stable investment income
• Likelihood of support from the GORTT if needed, notwithstanding declining economic activity

 Constraining Factors

• NIF’s cash flows are discretionary and high in concentration risk
• Refinancing Risk applies, given the bond’s structure

Rating Sensitivity Factors:

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

• Improvement in the credit risk profile of the GORTT
• Improvement in the credit risk profiles of TGU and RFHL

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

• A further deterioration in the credit risk profile of the GORTT over the next 12 months
• A deterioration in the cash flow adequacy ratio to less than 1 time
• A deterioration in the credit risk profiles of TGU and RFHL
• Breach of any covenants of the bond
• An unfavourable capital market environment in T&T given the increased likelihood that Series A (TT $1.2 billion) would need to be refinanced in 2023.

COMPANY BACKGROUND

The National Investment Fund Holding Company Limited (NIF or the Company) is a special purpose investment company created by the Government of the Republic of Trinidad and Tobago (GORTT) to monetize the Government’s assets held in the form of shares of various corporate entities in Trinidad and Tobago (T&T). The NIF issued a bond in the amount of TT $4.0 billion consisting of 3 tranches as follows:

1. Series A – TT $1.2 billion with a tenor of 5 years at a fixed rate of 4.5%
2. Series B – TT $1.6 billion with a tenor of 12 years at a fixed rate of 5.7%
3. Series C – TT $1.2 billion with a tenor of 20 years at a fixed rate of 6.6%

The bond, which was issued in August 2018, is tax free for investors and is structured to remit semi-annual coupon payments. The principal for each tranche will be repaid in the form of a bullet payment upon the maturity of the respective tranche, with provision for portions of Series A and Series B to be refinanced for a further period of 5 years each. The bond’s structure and refinancing element were designed to meet the domestic market’s high preference for 5-year paper. The bond is secured by a debenture on the shares of the companies owned by the NIF, with a total value of TT $9.3 billion as at July 2021 (Table 1), up from TT $7.9 billion as at the date of issue (August 2018)^[1].

Table 1

NIF Underlying Assets and Respective Values

The NIF’s income consists primarily of dividends from its underlying assets and is the primary source from which the interest and principal repayments on the bond will be made. A sinking fund was established to accumulate funds that would be applied toward principal repayment.

^[1] Based on Trinidad and Tobago Stock Exchange Share prices for RFHL, AHL, OCM and WITCO as at August 8, 2018.  TGU’s valuation was completed by Duff and Phelps in July 2018.

Analytical Contacts:

Megan Dass

Tel: 1-868-627-8879 Ext. 239

E-mail: mdass@caricris.com

Keith Hamlet

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

Cell: 1-868-487-8356

E-mail: khamlet@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.