Fitch Expects to Rate Banco Nacional de Costa Rica's Proposed Notes 'BB(emr)'
The size, maturity and interest rate of the offering are not yet defined. The notes will be BNCR's direct, unconditional and unsecured general obligations and would represent a new international 144A/Reg S issuance.
The net proceeds of these senior notes are expected to be used for general corporate purposes, including the repayment and/or refinancing BNCR's outstanding indebtedness. BNCR's ratings are not affected by the additional debt issuance.
KEY RATING DRIVERS
The 'BB(EXP)'emr rating reflects that these are senior unsecured obligations of BNCR that rank pari passu with other senior unsecured indebtedness, and therefore, this rating is aligned with the bank's Foreign Currency Issuer Default Ratings (FC IDR) of 'BB'/Stable Outlook.
The notes are denominated in Costa Rican Colones (CRC), but the settlement amount paid to the investors will be denominated in USDs at the prevailing exchange rate. The subscript 'emr' was added to the rating of the local currency-linked issuance to reflect the embedded market risk of exchange rate fluctuations between the CRC and the USD given that the issuance will be denominated in CRCs while settlement will be in USDs.
Fitch considers the bank's FC IDR as the appropriate anchor for this issue rating. Given that the settlement of the notes is in USDs, there is transfer and convertibility risk, which is addressed by the entity's FC IDR, regardless of the fact that the issuer is not bearing any material currency risk, since these notes will be denominated in CRCs.
The rating assigned to the notes is sensitive to any change in BNCR's foreign currency IDR.
For further details on BNCR's Viability rating, drivers and sensitivities, please see 'Fitch Downgrades Costa Rican Banks following Sovereign Downgrade' (Jan. 27, 2017) at www. fitchratings. com.
Fitch currently rates BNCR as follows:
--Long-Term Foreign and Local Currency IDR 'BB'; Outlook Stable;
--Short-Term Foreign and Local Currency IDR 'B';
--Support Rating '3';
--Viability Rating 'bb';
--Long-term National scale rating 'AA+(cri)'; Outlook Stable;
--Short-term National scale rating 'F1+(cri)';
--Long-term National scale rating for local senior debt issuances 'AA+(cri)'.