New York, July 28, 2021 -- Moody's Investors Service ("Moody's") has today
assigned a Baa3 (hyb) rating to the Tier 2 subordinated capital notes
to be issued by Banco Nacional de Comercio Exterior, Sociedad Nacional
de Crédito, Institución de Banca de Desarrollo (Bancomext)
through its Cayman Islands branch, Banco Nacional de Comercio Exterior,
SNC (CI).
The bond issuance will be designated as a Sustainability Bond in alignment
with the International Capital Market Association's 2018 Sustainability
Bond Guidelines and the proceeds of the issuance will be used to finance
or refinance green and social projects, or a combination.
The following rating was assigned to Bancomext's proposed Tier 2 subordinated
capital notes for up to $700 million with a ten-year maturity:
Long-term foreign currency subordinated debt rating of Baa3 (hyb)
RATINGS RATIONALE
The Baa3 (hyb) rating for Bancomext's subordinated capital notes,
eligible for Tier 2 capital treatment, considers the incremental
probability of default of the notes absent extraordinary support from
the Mexican government, the bank's sole shareholder, that
results from interest deferral provisions tied to high capitalization
thresholds and a higher loss given default reflecting the subordination
of the notes to other claims on the bank. The rating also incorporates
Moody's assessment of a high probability of support for the notes from
the Mexican government should the bank face financial stress.
Bancomext has the right to defer but not cancel payment of interest or
principal if capitalization ratios fall below 10.5% for
the total capital ratio, 8.5% for the Tier 1 (Capital
Nivel 1) ratio, and 7% for the Common Equity Tier 1 (Capital
Común Nivel 1) ratio. As of March 2021, Bancomext's
capitalization ratios were all well above minimum regulatory requirements,
with a total capital ratio of 19.48%, a Tier 1 ratio
of 13.63%, and a Common Equity Tier 1 ratio of 13.63%.
The subordinated capital notes are (i) subordinated and junior in right
of payment and in liquidation to all of Bancomext's present and
future senior indebtedness, (ii) pari passu with all of the bank's
other present or future subordinated preferred indebtedness, (iii)
senior to all of the bank's present and future subordinated non-preferred
indebtedness and (iv) senior to all classes of capital stock.
The Baa3 (hyb) rating for these notes considers two notches of subordination
from the bank's foreign currency senior unsecured debt rating of
Baa1 and benefits from Moody's assessment of high government support because
of Bancomext's status as an arm of the government, with a specific
public policy role to promote the export sector and those industries that
attract foreign currency to Mexico. Bancomext also complements
commercial banks' products, mainly in initial-stage projects,
by offering US dollar long-term financing for investments,
rather than short-term working capital in Mexican pesos.
Moody's assumption of support for the subordinated capital notes
also considers statutory support from the Mexican government, which
is committed in Article 10 of Bancomext's Organic Law[1] to fulfill
the bank's financial obligations. The support statute is not a
blanket guarantee, and, as a result, does not qualify
for credit substitution for the subordinated preferred notes when capital
ratios fall below their minimum regulatory requirements, as stated
in the indenture. Moreover, the government's statutory
responsibility (i) only benefits Mexican individuals and both Mexican
and foreign institutions, and explicitly excludes non-Mexican
individual, (ii) does not include an explicit commitment to ensure
timely payment, and (iv) is subject to budgetary restrictions.
The government's ability to provide support is derived from its Baa1 bond
rating, with a negative outlook.
BANCOMEXT'S ADJUSTED BASELINE CREDIT ASSESSMENT OF ba2
Bancomext's ba2 baseline credit assessment (BCA) captures the bank's good
asset quality and capitalization, as well as its conservative underwriting
processes and ample access to the capital markets. The bank's focus
on export-oriented industries will partly mitigate asset risks
stemming from Mexico's weaker economic prospects beyond 2021, and
the bank's relatively high exposure to the hospitality sector, which
was particularly hit by the pandemic.
The bank's credit profile is limited by sizable sector and, particularly,
single-borrower concentrations, and narrow profitability
derived from a focus on lending to large corporates, as well as
its relatively high funding costs when compared to commercial banks.
Bancomext does not take retail deposits and relies on market funding,
but refinancing risks are mitigated by the government backing of the development
bank. The bank maintains low levels of liquid assets, when
excluding investments that are restricted or given as a guarantee.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Bancomext's BCA and subordinated debt rating could be downgraded
if there is a higher-than-expected deterioration in its
asset quality and capitalization. Downward pressure on the subordinated
debt rating would also accumulate if, in line with the negative
outlook, Mexico's sovereign rating were to be downgraded.
Bancomext's BCA and subordinated debt rating could benefit from sustained
improvements in the bank's capitalization, profitability and liquidity
buffers.
The principal methodology used in this rating was Banks Methodology published
in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
REFERENCES/CITATIONS
[1] Ley Orgánica del Banco Nacional de Comercio Exterior 20-Jan-1986
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
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Felipe Carvallo
VP - Senior Credit Officer
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
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
Ceres Lisboa
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
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