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Global Credit Research - 17 Jan 2014
NOTE: On December 11, 2014, the press release was revised as follows: in the REGULATORY DISCLOSURES section, removed Quality of Information, MIS Ratings Definitions, Rating History and Ratings Opinion and Disclaimer Regarding Liability regulatory disclosure items; corrected releasing office information to Moody's Investors Service, Inc. from Moody's de Mexico S.A. de C.V. Revised release follows.
New York, January 17, 2014 -- Moody's Investors Service today affirmed all of Grupo Aval Acciones
y Valores S.A.'s (Grupo Aval) ratings and changed
the outlook to stable, from negative. The ratings affirmed
were the Baa3 long-term local and foreign currency issuer ratings
and Prime-3 short-term local and foreign currency issuer
ratings. Moody's also affirmed Grupo Aval's Baa3 long-term
foreign currency debt rating of the senior unsecured notes issued by the
Cayman Islands-based Grupo Aval Limited, a fully guaranteed
subsidiary of Grupo Aval.
The following Grupo Aval ratings were affirmed with a stable outlook:
Grupo Aval Acciones y Valores S.A.
Long-term local currency issuer rating of Baa3
Short-term local currency issuer rating of Prime-3
Long-term foreign currency issuer rating of Baa3
Short-term foreign currency issuer rating of Prime-3
Grupo Aval Limited
Long-term foreign currency senior debt ratings of Baa3
Moody's affirmed all of Grupo Aval's ratings with a stable
outlook following the recent capital infusion from existing shareholders,
which reduced the holding company's double leverage, as well
as the repayment of debt, which also enhanced its liquidity.
The affirmation and return to stable outlook also reflect the holding
company's improving earnings generation capacity due to both organic
growth of its operating subsidiaries and bank acquisitions particularly
in Central America which will support earnings growth in the coming years.
Between December 2013 and January 2014, Grupo Aval raised COP2.4
trillion in capital from existing shareholders which the holding company
used to repay COP1.4 trillion in loans from companies owned by
Grupo Aval's controlling shareholder and to replenish the COP 1.1
trillion of resources previously used to capitalize Banco de Bogotá
S.A. (C-/baa2 stable, Baa3 stable) to support
the bank's acquisition of Grupo Financiero Reformador of Guatemala
and Banco Bilbao Vizcaya Argentaria Panamá, S.A.
(BBVA Panamá), both completed in December 2013.
As a result, Grupo Aval's double leverage declined from 132%
as of year-end 2012 to a more adequate level of around 120%,
said Moody's. Grupo Aval had issued a substantial COP2.9
trillion in debt during 2012, which had led to an increase in double
leverage to an estimated 140%, up from 110% as of
year-end 2011, based on Moody's estimated use of proceeds,
prompting the September 2012 negative outlook. Moody's calculation
of double leverage includes investments in subsidiaries at book value,
loans to subsidiaries and goodwill as a percentage of shareholders'
equity excluding asset revaluations. Moreover, liquid assets
are expected to cover 35% of total debt through year-end
2013, up from a low of 15% as of June 2013.
Increasing dividend income from Grupo Aval's operating subsidiaries
also supports the return to stable outlook. In 2013, dividend
income increased by 16% to COP822 billion, mainly related
to a 24% increase from Banco de Bogotá, the largest
operating subsidiary that contributes 50% of total dividends.
Combined dividends from Grupo Aval's other equity participations
increased by 8%, particularly from Banco Popular S.A.
which contributed 22% of dividend income, Banco de Occidente
S.A. with 19%, and Banco Comercial AV Villas
S.A. with 8%. Moody's expects dividend
income to maintain healthy growth in the range of 10%-15%
for the next two years as the group integrates its acquisitions and income
and cost synergies materialize.
Moody's also noted that Grupo Aval's recent acquisitions will
help the holding company to build earnings thus further lowering double
leverage. Banco de Bogotá's acquisition of Grupo Financiero
Reformador of Guatemala and BBVA Panamá will strengthen the market
presence of its Central American subsidiary, BAC Credomatic,
in two key growth markets in the region. The acquisition of BBVA
Horizonte AFP S.A. in Colombia added notable market share
to the group's pension fund administrator AFP Porvenir S.A.
and thus should assure the group's dominance in the administration
of mandatory pension funds and severance funds in Colombia and its position
as the third-largest provider of voluntary pensions.
At the same time, Moody's highlighted Grupo Aval's acquisitive
regional expansion strategy and indicated that should the group announce
further significant acquisitions or increase its debt levels, these
factors could trigger a negative rating action.
The principal methodology used in this rating was Global Banks published
in May 2013. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
The date of the last Credit Rating Action was 18 September 2012 when Moody's
changed the outlook for all of Grupo Aval and Grupo Aval Limited's
ratings to negative, from stable.
Grupo Aval is the holding company for Banco de Bogotá, Banco
de Occidente, Banco Popular, Banco AV Villas and AFP Porvenir
and is headquartered in Bogotá, Distrito Capital, Colombia.
Grupo Aval Limited is a fully guaranteed subsidiary of Grupo Aval established
for the issuance of the holding company's debt and domiciled in
the Cayman Islands. As of September 2013, Grupo Aval combined
with Grupo Aval Limited reported unconsolidated assets of COP27.0
trillion and shareholders' equity of COP21.2 trillion.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Please see www.moodys.com for any updates on changes
to the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vice President - Senior Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Maria Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
Moody's affirms Grupo Aval's ratings; changes outlook to stable
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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