Regional rating agency Caribbean Information and Credit Ratings Services Limited (CariCRIS) has assigned initial credit ratings of CariAA on the regional rating scale and ttAA on the national scale to the proposed $4 billion debt issue of the National Investment Fund Holding Company Limited (NIF).
In a release yesterday, the agency said the ratings, which are of investment grade quality, indicate that the level of creditworthiness of this debt obligation is high.
“Notwithstanding the absence of an explicit Government guarantee for the bond, our ratings include a one-notch upgrade for the high likelihood of support for moral and economic reasons from the Government of the Republic of Trinidad and Tobago, should this be required,” CariCRIS said.
The agency assigned a stable outlook for the ratings “based on our expectations that over the next 12-15 months, the net dividend payments from the underlying assets of the NIF will be more than adequate to meet the coupon payments that will come due on bond during the period.”
CariCRIS said the ratings of the NIF are supported by the high asset quality of its underlying assets, which “lends to stable and reliable cash flows throughout the life of the bond and also provide adequate debt servicing capacity.”
The agency added: “Debt service coverage, inclusive of the sinking fund balance, remains comfortably above one for the life of the bond, indicative of a comfortable cushion for the NIF in meeting its total debt obligations (interest and principal).
“These ratings’ strengths are tempered by the discretionary nature of the NIF’s cash flows which are primarily sourced from dividends, as well as a high level of concentration risk given that 88.5 per cent of its earnings are derived from two entities, though this risk, to a large extent, is mitigated by the strong and healthy financial performance of both companies, as well as their history of strong dividend payments.
“The risk of possibly having to refinance the two tranches of the bond at higher interest rates also tempers the ratings.”
