New York, January 25, 2021 -- Moody's Investors Service ("Moody's") has today confirmed all long-term
ratings of Gilex Holding S.A. ("Gilex Holding", senior
secured rating B2) as well as the long-term ratings and assessments
of its lead bank, Banco GNB Sudameris S.A. ("GNB Sudameris",
Ba2 for deposits), including the ba3 standalone Baseline Credit
Assessment (BCA). The outlook on the bank's and on the holding's
ratings is now negative.
The rating agency also downgraded Banco Bilbao Vizcaya Argentaria Paraguay
("BBVA Paraguay") long-term local and foreign currency counterparty
risk ratings to Ba1 from Baa3, the short-term local and foreign
currency counterparty risk ratings to Not Prime, from Prime 3,
as well as the long-and short-term counterparty risk assessments
to Ba1(cr) and Not Prime(cr), from Baa3(cr) and Prime 3(cr).
The bank`s adjusted baseline credit assessment (BCA) was also downgraded
to ba2 from ba1. The rating agency affirmed BBVA Paraguay's
short term local and foreign currency deposit ratings of Not Prime and
confirmed all of the bank's other ratings and assessments,
including its ba2 BCA. The outlook for the ratings is now negative.
The rating actions follow the completion the completion of Banco GNB Paraguay
S.A.'s (GNB Paraguay) acquisition of BBVA Paraguay
announced on 22 January 2021. GNB Paraguay is a subsidiary of GNB
Sudameris.
The rating actions conclude Moody's review of GNB Sudameris` and
BBVA Paraguay's ratings that began on 13 August 2019, when
the transaction was first announced.
A complete list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The confirmation of GNB Sudameris and Gilex's ratings follows the
recent approval by relevant regulatory authorities of the acquisition
of BBVA Paraguay by GNB Paraguay, a subsidiary of GNB Sudameris,
which, in turn, is a subsidiary of Gilex Holding. GNB
Paraguay closed and paid the all-cash acquisition on January 22nd
at a price of $251 million. In connection to the acquisition,
GNB Paraguay received a $57 million capitalization from GNB Sudameris.
Additionally, GNB Paraguay sold 32% of the combined pro-forma
bank to Grupo Vierci, a Paraguayan-based retail-to-media
company, for $173 million. The proceeds of the Grupo
Vierci transaction were allocated to the acquisition of BBVA Paraguay.
The acquisition will create the largest commercial bank in Paraguay,
with $2.6 billion in deposits and $3.3 billion
in total assets. GNB Sudameris will retain a 68% ownership
of GNB Paraguay, with Grupo Vierci holding 32% of the new
bank's shares.
GNB SUDAMERIS
The confirmation of GNB Sudameris' ratings and assessments incorporates
the bank's historically good asset quality and stable liquidity,
which are partially offset by its low capitalization and the challenges
to asset risk and profitability deriving from the weak operating conditions
in Colombia.
The negative outlook on GNB Sudameris' ratings reflects downward pressures
on its baseline credit assessment (BCA) derived from the bank's
augmented exposure to weaker operating conditions in Paraguay, which
will now account for 36% of GNB Sudameris' loans, doubling
its previous 17% exposure to that country. The negative
outlook also incorporates Moody's expectation that GNB Sudameris'
asset risk, profitability and capital metrics will weaken further
as unemployment remains high and economic activity modest into 2021 in
its major operating market, Colombia. The bank's problem
loans rose to 2.3% of gross loans as of September 2020,
from 2.1% as of 2019, but uncertainty about the effects
of the pandemic and pace of economic recovery weigh on asset quality metrics
and provisioning needs. GNB Sudameris' Moody's capitalization
ratio, measured as tangible common equity (TCE)/risk-weighted
assets (RWA), increased to 7.9% as of September 2020,
from 7.5% as of 2019, as a result of the capital injection
early in 2020 in anticipation of the acquisition of BBVA Paraguay.
That said, Moody's estimates GNB Sudameris' TCE/RWA
ratio will remain low and below that of its rated Colombian peers.
GILEX HOLDING
The confirmation of Gilex Holding's ratings with negative outlook follows
the confirmation of GNB Sudameris´ BCA and incorporates the downward
pressure on GNB Sudameris' baseline credit assessment. As
a holding company, Gilex depends on its primary operating subsidiary
Banco GNB Sudameris' dividends to service its debt and repay principal.
As such, Gilex's senior secured debt is structurally subordinated
to the obligations of GNB.
Gilex Holding´s ratings also incorporate the company´s somewhat
high double leverage ratio, which is measured by investments in
subsidiaries relative to shareholders' equity, at around 118%
and reflects the extent to which a holding company relies upon debt to
finance its investments in subsidiaries. Moody's considers double
leverage in excess of 115% to be high. This leads to a rating
two notches below GNB's baseline credit assessment (BCA) of ba3,
one notch wider than Moody's typical notching for financial holding companies.
That said, the company has a high interest coverage ratio underpinned
by strong dividend income from its subsidiaries, with core earnings
amounting to 2.1 times interest expenses in June 2020. In
addition, Gilex Holding has enough liquidity and interest income
in dollars, limiting its reliance on dividend inflows to meet upcoming
debt obligations.
BBVA PARAGUAY
The conclusion of the review and the downgrade of BBVA Paraguay's supported
ratings follow the completion of GNB Sudameris' acquisition of BBVA
Paraguay through GNB Paraguay. Consequently, BBVA Paraguay's
ratings will no longer benefit from affiliate support from its previous
parent bank, Banco Bilbao Vizcaya Argentaria S.A.
(A2 stable). Moody`s assessment of support for BBVA Paraguay from
GNB Sudameris is high, however, its deposit rating will not
incorporate uplift from affiliate support because GNB Sudameris` BCA is
lower than that of BBVA Paraguay.
BBVA Paraguay will continue to exist as an indirect subsidiary of GNB
Sudameris and, under Paraguayan law, it will be merged into
GNB Paraguay over a maximum period of six months.
The confirmation of the bank`s ba2 BCA reflects BBVA Paraguay`s strong
capitalization, resilient profitability, and conservative
risk management, in line with that of its former parent bank.
BBVA Paraguay`s BCA also reflects its limited reliance on confidence sensitive
market funding and high levels of liquid assets.
Moody`s confirmation of BBVA Paraguay`s long term deposit ratings reflects
the rating agency`s assessment of a high probability of government support
in the event of stress in light of its relevant deposit market share that
results in one notch uplift to its deposit ratings to Ba1, from
its ba2 BCA.
The negative ratings outlook reflects the risks of integrating BBVA Paraguay
into GNB Paraguay that could lead to client and business attrition,
with negative effect on earnings generation, a decline in capitalization,
or changes to its risk management policies leading to rising asset risk.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
GNB SUDAMERIS
GNB Sudameris' ratings could be downgraded if asset risk and profitability
continue to deteriorate and/or the capitalization ratio declines from
current levels. However, the ratings would not be affected
by a downgrade of the Government of Colombia's sovereign bond rating of
Baa2. While an upgrade of GNB Sudameris' ratings is unlikely given
the negative outlook on its ratings, the outlook could be stabilized
if the bank manages to maintain asset quality and earnings and improve
its capitalization levels.
GILEX HOLDING
Upward/downward pressures on Gilex Holding's ratings would be associated
with similar pressures on GNB Sudameris' BCA. The ratings could
also face downward pressures if the group's double leverage appear likely
to exceed 115% by a meaningful amount on a sustained basis and/or
the interest coverage ratio decrease significantly.
BBVA PARAGUAY
At this time, the negative outlook on the bank's ratings precludes
any upward pressure. The bank's BCA could be downgraded if
its asset quality deteriorates materially as a result of changes in its
risk appetite and management policies, leading to rising provisioning
expenses and lowering profitability. A decline in the bank's
capitalization from historically elevated levels would also be negative
for the ratings. The outlook could be stabilized if the bank's
asset quality, capitalization and profitability remain in line with
historical levels.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Banco GNB Sudameris is headquartered in Bogota, Colombia.
The bank had total consolidated assets of COP41,628 billion and
shareholders' equity of COP2,221 billion as of 30 September 2020.
Gilex Holding S.A. (Gilex) is a private limited liability
company incorporated under the laws of Panama, whose only significant
assets are its ownership of a 94.7% equity interest in GNB
and a 1.5% equity interest in Servitrust GNB Sudameris S.A.,
(Servitrust), a subsidiary of Banco GNB Sudameris S.A.
(GNB).
BBVA Paraguay is headquartered in Asuncion and had total assets of PYG
13.4 trillion ($ 1.9 billion) and equity of PYG 1.3
trillion as of 30 September 2020.
ISSUERS AND RATINGS AFFECTED
The following Banco GNB Sudameris S.A.'s ratings and assessments
were confirmed:
- Long-term local currency deposit rating of Ba2,
Negative from Ratings Under Review
- Long-term foreign currency deposit rating of Ba2,
Negative from Ratings Under Review
- Long-term global foreign currency subordinated debt rating
of B1
- Long-term local currency counterparty risk rating of Ba1
- Long-term foreign currency counterparty risk rating of
Ba1
- Adjusted Baseline Credit Assessment of ba3
- Baseline Credit Assessment of ba3
- Long-term counterparty risk assessment of Ba1(cr)
The following Banco GNB Sudameris S.A.'s ratings and assessments
were affirmed
- Short-term local currency deposit ratings of Not Prime
- Short-term foreign currency deposit rating of Not Prime
- Short-term local currency counterparty risk rating of
Not Prime
- Short-term foreign currency counterparty risk rating of
Not Prime
- Short-term counterparty risk assessment of NP(cr)
-Outlook, changed to Negative, from Ratings Under Review
The following Gilex Holding S.A.'s ratings were confirmed:
- Long-term global local currency issuer rating of B2,
Negative from Ratings Under Review
- Long-term global foreign currency senior secured rating
of B2, Negative from Ratings Under Review
-Outlook, changed to Negative, from Ratings Under Review
The following ratings and assessments assigned to BBVA Paraguay S.A.
were downgraded:
- Long -term local and foreign currency counterparty risk
ratings to Ba1 from Baa3, respectively
- Short-term local and foreign currency counterparty risk
ratings to Not-Prime from Prime-3, respectively
- Adjusted baseline credit assessment to ba2 from ba1
- Long-term counterparty risk assessment to Ba1(cr) from
Baa3(cr)
- Short-term counterparty risk assessment to Not-Prime(cr)
from Prime-3(cr)
The following ratings and assessments assigned to BBVA Paraguay S.A.
were confirmed:
- Long-term local currency deposit rating of Ba1,
Negative outlook from Ratings Under Review
- Long-term foreign currency deposit rating of Ba1,
Negative outlook from Ratings Under Review
- Baseline credit assessment of ba2
The following ratings assigned to BBVA Paraguay S.A. were
affirmed:
- Short-term local currency deposit rating of Not Prime
- Short-term foreign currency deposit rating of Not Prime
-Outlook, changed to Negative from Ratings Under Review
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
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affected the rating. For further information please see the ratings
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For any affected securities or rated entities receiving direct credit
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and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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Vice President - Senior Analyst
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MD - Banking
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Asst Vice President - Analyst
Financial Institutions Group
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