Fitch Ratings has assigned an 'AA-' rating to Corporacion Andina de Fomento's (CAF) four-year Turkish lira (TRY) and South African Rand (ZAR) senior unsecured notes. Repayment of principal and interest is in the currency of issuance. A full list of CAF's current ratings follows at the end of this press release.
Based on the documentation provided, CAF issued TRY157 million and ZAR 253 million fixed-rate senior unsecured notes under its medium term note programme. The notes carry a 7.35% and 6.5% coupon, respectively, and will mature on Dec. 18, 2018. Interest payments will be paid semi-annually commencing on June 18, 2015 up to and including the maturity date. Although CAF has issued notes for secondary distribution (Uridashi) in Japan before, this is its first issuance in these currencies.
The proceeds will be used for general business purposes. Considering the multilateral bank's financial profile, the impact on CAF's leverage of this issuance is not deemed significant by Fitch.
KEY RATING DRIVERS
CAF's solid financial profile and the privileges and immunities conferred on it by its member countries drive its ratings. However, the member countries' creditworthiness relative to higher rated multilateral development banks (MDB) as well as still relevant loan concentrations, weigh on the entity's IDRs.
RATING SENSITIVITIES
The rating on the senior notes is sensitive to any change in CAF's long-term foreign currency IDR. The Stable Outlook on CAF's IDRs reflects Fitch's expectation of continued conservative risk management, which should sustain CAF's steady financial performance and a risk profile compatible with its current ratings. However, the ratings triggers that could individually or collectively affect IIC's ratings are the following:
--Though not likely in the near term, CAF's ratings could benefit from a sustained reduction of loan concentrations, as well as material improvements in its borrowers' creditworthiness or in capitalization ratios.
--A stress situation in a member country that significantly affects asset quality or results in the invalidation of CAF's preferred creditor status or transfer and convertibility restrictions for private sector borrowers would be negative for creditworthiness.
--Additionally, a prolonged decline in capitalization related to asset losses, rapid operations growth or increased earnings volatility as well as a structural weakening of liquidity in the context of reduced capital market access could also be negative for CAF's ratings.
KEY ASSUMPTIONS AND SENSITIVITIES
The ratings and Outlook are sensitive to a number of assumptions as follows:
--Member countries, even if experiencing severe difficulties (such as Argentina, rated 'RD', or Venezuela, rated 'CCC'), will continue to honor CAF's preferred creditor status and exempt its private sector borrowers from any measures that may impact the transfer and/or convertibility of their debt service payments, should any member country decide to default selectively to their creditors.
--Shareholder support will remain strong, with the expectation that paid-in capital contributions will continue to be received on time from CAF's member countries.
Fitch currently rates CAF as follows:
--Long-term Issuer Default Rating (IDR) 'AA-'; Outlook Stable;
--Short-term IDR 'F1+';
--Senior unsecured debt 'AA-';
--Commercial paper 'F1+';
--Long-term National Rating in Venezuela 'AAA(ven)'*; Outlook Stable);
--Short-term National Rating in Venezuela 'F1+(ven)';
--Long-term National Debt Rating in Mexico 'AAA(mex)';
--Long-term National Debt Rating in Panama 'AAA(pan)'.
*The 'AAA(ven)' rating is equivalent to an 'A1' rating when using the mandatory rating scale required by the local Securities Exchange Commission.
Additional information is available 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Supranationals Rating Criteria' (May 22, 2014).
Applicable Criteria and Related Research:
Supranationals Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748877
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=972036
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