The fallout from Jamaica’s recently approved debt exchange arrangement has hit at least one of Barbados’ biggest financial institutions.
Sagicor Financial Corporation, which has hundreds of millions of dollars in investments in Jamaica, had some of its companies placed “under review with negative implications” for its financial strength rating by international insurance rating company A.M. Best Co.
In a statement from A.M. Best just days after Jamaica announced plans to cut interest payments on many of its debt instruments, the rating agency said it had “placed under review with negative implications the financial strength rating of A- (Excellent) and issuer credit ratings of ‘a-’ of Sagicor Life Inc., Sagicor Capital Life Insurance Company Limited (both domiciled in Barbados), Sagicor General Insurance Inc. [based in] Barbados) and Sagicor Life Insurance Company [based in Austin, Texas].”
In addition, A.M. Best, which is based in the United States with offices in Britain and Hong Kong, said it had placed under review “with negative implications” the issuer credit rating and debt rating on a US$150 million 7.5 per cent senior unsecured notes due in 2016 to the ultimate parent, Sagicor Financial Corporation.
In explaining the decision, A.M. Best said, “The under review status follows the announcement of a debt exchange programme by the Government of Jamaica, which A.M. Best notes is the second such programme in three years.”
It added that under the programme, eligible investors in Jamaica government instruments would receive new notes that had lower coupons and longer maturities.
Given Sagicor’s exposure to the business and financial risks of Jamaica through its controlling interest in Sagicor Life of Jamaica, the ratings of Sagicor and its subsidiaries had been “placed under review with negative implications”, the agency explained.
It added: “The downgrading of the ratings of [Sagicor General Insurance] reflects its sizeable exposure to the Jamaican Government securities, as well as the ongoing pressures of the weak Jamaican economy.”
The agency said the ratings would remain under review pending further clarification of the full impact of the exchange programme on the results and capitalization of the group.
Meanwhile, Caribbean Information & Credit Rating Services Limited (CariCRIS), based in Trinidad and Tobago, also placed all its rated entities in Jamaica on “rating watch – developing” as a direct result of the Jamaica domestic debt exchange.
CariCRIS said the exchange offer transaction was likely to have varying degrees of impact on the profitability, capital adequacy, asset quality and asset values of its rated financial institutions in Jamaica.
CariCRIS’ publicly rated entities in Jamaica are the National Commercial Bank Jamaica Limited, NCB Capital Markets Limited, Sagicor Life Jamaica Limited, Sagicor Investments Jamaica Limited (formerly Pan Caribbean Financial Services Limited) and the Development Bank of Jamaica Limited.
