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CABEI: One step away from having the best credit rating in Latin America

   By: BCIE    News   

S&P, the upgrade in CABEI's credit rating incorporates key developments following the amendments to CABEI's Constitutive Agreement
S&P, the upgrade in CABEI's credit rating incorporates key developments following the amendments to CABEI's Constitutive Agreement

Standard & Poor's raises CABEI's credit rating to 'A+' and assigns a new Positive Outlook on it, reflecting the enhancement of its business profile, which has led to the incorporation of new shareholders such as the Republic of Korea, as well as further capital injections.

Tegucigalpa, July 16, 2018.- Standard & Poor's Financial Services (S&P) raised Central American Bank for Economic Integration's (CABEI) Long-Term Issuer Credit Rating to 'A+' and assigned it a new positive outlook.

According to the statement issued by S&P, the upgrade in CABEI's credit rating incorporates key developments following the amendments to CABEI's Constitutive Agreement, effective in June 2016, to improve the Bank's governance structure, increase its membership base, and unlock additional financing through diversification and capital injections.

In this regard, S&P highlighted that the incorporation of the Republic of Korea will diversify and further strengthen CABEI's shareholder base, pointing out that this country will become the second-largest non-regional shareholder with its capital subscription of US $450 million, equivalent to a 7.6% participation. S&P also indicated that CABEI has successfully diversified its loan portfolio over the past few years.

For his part, CABEI’s Executive President, Dr. Nick Rischbieth, stated that CABEI's credit rating and its positive outlook are the result of the decisions taken by the Board of Governors to modify the Constitutive Agreement, which have had a positive impact on the Bank's business profile in the short term. In this regard, the Executive President indicated that the amendments included the redefinition of the Central American region through the inclusion of Panama, the Dominican Republic and Belize, and that they have fostered the incorporation of new members and have allowed to promote a diversification process of the loan portfolio and further strengthen the institution's preferred creditor status.

The Executive President also stressed the importance for CABEI of attracting a highly rated member such as the Republic of Korea, which has had an immediate and positive impact on the Bank's financial and business profile, strengthening its institutional governance and enhancing the benefits of the cooperation schemes signed between CABEI and Korean institutions in favor of its member countries.

As for the positive outlook, S&P indicated that it reflects its expectation that, over the next 24 months, there will be significant improvements in CABEI's capital levels, which would translate to a stronger financial profile assessment. In this regard, S&P stated that its expectation of an improvement in CABEI's capitalization level relies on the approval of a general capital increase in the near term, as well as the uplift received with the incorporation of the Republic of Korea's callable capital.

In this aspect, Dr. Rischbieth noted that CABEI's eighth capital increase, currently under discussion, comprises an unquestionable sign of the commitment of the member countries to the institution, and will constitute the Bank’s second capitalization process in the last decade, in contrast to the challenges faced by multilateral banks in this aspect, noting that the improvement in the credit rating by Standard & Poor's to a level of 'AA-', is expected to materialize in the short term, with which CABEI will have the best credit rating throughout Latin America.