New York-based credit rating agency Standard & Poor’s (S&P) has upgraded Sagicor Finance (2015) Ltd two notches.
The upgrade late Friday evening moves the previously Barbados-based financial institution, owned more than 50 per cent by Trinidad and Tobago investors, according to Sagicor Group chief operating officer Richard Kellman, up to “non-investment grade” from “highly speculative” grade.
S&P Global Ratings raised its issue-level rating on Sagicor Finance (2015) Ltd’s (SFL15’s) US$320 million seven-year senior unsecured notes to “BB-” from “B”, saying in a statement: “We also removed the rating from Credit Watch positive, where we placed it in September 2016.”
Mexico City-based S&P analysts Jesus Palacios and Camilo Andres Perez wrote: “The rating actions are based on our opinion that the sovereign rating on Barbados no longer constrains the group credit profile (GCP) of Sagicor Financial Corporation (SFC) given two significant changes in the corporate structure. First, the group’s ultimate parent, SFC, moved its domicile to Bermuda from Barbados. Second, the group is undergoing a corporate reorganisation including the separation of its Caribbean and Central American operating subsidiaries outside of Barbados from its operating holding company, Sagicor Life Inc Barbados (SLIB), and shifting them under SFC’s structure directly and individually.”
In a separate statement on SLIB, Perez and Palacios said: “We’re keeping our ‘BB-‘ ratings on Barbados-based insurer SLIB on Credit Watch with negative implications because the corporate reorganisation of the ultimate parent is still ongoing while we continue to assess its impact on SLIB.”
Returning to the upgrade rating, Palacios and Perez said: “Therefore, we conclude that both events have reduced the potential burden on the group’s assets and cash flows outside of Barbados because the group’s main regulator will no longer be the Barbadian insurance authority. Consequently, we no longer consider Barbados as the group’s country of domicile. Moreover, the ratings on SFC’s subsidiaries and financing vehicles may now reflect the full strength of the unconstrained GCP at ‘bb+’, which reflects the credit fundamentals of its operating insurance subsidiaries. Prior to the above-mentioned changes, the GCP and the ratings on operating entities – at ‘bb-‘ and ‘BB-‘, respectively-were limited at two notches above the sovereign rating on Barbados.”
They added: “The rating on SFL15’s debt reflects structural subordination from our credit assessment of SFC to account for the debt’s structural subordination to policyholder liabilities and for the seniority of the debt. Therefore, we raised the debt rating by two notches to reflect the two-notch uplift of SFC’s GCP to ‘bb+’ from ‘bb-‘. We don’t give additional credit to the guarantee provided by SFC and SLIB because the subordination of the group’s financial obligations to those of policyholders is defined in the offering memorandum.”
The Cayman Islands-based SFL15 is SFC’s special purpose vehicle to provide funding to the group and is the issuing entity of SFC’s US$320 million seven-year senior unsecured notes.
Palacios and Perez said: “Our analysis of rating fundamentals considers SFC’s consolidated results, which include the entirety of its insurance operating subsidiaries in the Caribbean region, the US, and Central America.” (Trinidad Express)