Stable outlook for T&T’S Home Mortgage Bank
Caribbean information and Credit rating Services Limited (Caricris) has revised its rating on Trinidad and Tobago’s Home Mortgage bank (HMB) from negative to stable.
The rating agency also reaffirmed the assigned currency corporate credit ratings of Caria on the regional scale, and tta on the national scale of the HMB. These ratings indicate that the level of creditworthiness of this obligor — adjudged in relation to other obligors in the Caribbean and within T&T — is good.
“The stable outlook is based on the slowly improving macroeconomic conditions in Trinidad and Tobago, which should lead to continued good asset quality and financial performance for HMB, as well as strong capitalisation,” the rating agency said.
HMB’S ratings reflect its good financial performance supported by good growth in assets and its strong capitalisation, well above that of its peers. The ratings are further supported by the bank’s high-quality asset portfolio and its moderately diversified funding base, facilitating good liquidity management.
“These rating strengths are tempered by the challenging economic environment in the Trinidad and Tobago economy, which could lead to some deterioration in HMB’S financial performance. The bank’s small share of the competitive T&T real estate mortgage market, along with its risk management framework not being fully implemented, also temper the ratings.
The Home Mortgage Bank (HMB) was established in the Republic of Trinidad & Tobago (T&T) under the Home Mortgage Bank Act of 1985 and commenced business in October 1986.
HMB is now a fully owned subsidiary of the National Insurance Board of Trinidad & Tobago (NIB).
Days before HMB’S rating was upgraded to stable, CARICRIS also assigned preliminary project finance issue ratings of Caria+ on the regional rating scale and tta+ on the Trinidad and Tobago (T&T) national scale to the proposed Us$85-million senior secured syndicated loan of Niquan Energy Trinidad Limited (NETL).
According to CARICRIS, the ratings indicate that the level of creditworthiness of the proposed debt obligation, adjudged in relation to other obligations in the Caribbean and within T&T, is good.
“We will finalise our ratings when we obtain greater clarity on Petrotrin’s current restructuring efforts, particularly as they relate to the negotiated off-take arrangement with NETL,” it said.
The ratings are supported by low construction and technology risk, due to a fixed price lump sum turnkey contract with plant performance guarantees, and the use of reputable and commercially tested technology.
“The ratings are also supported by a favourable natural gas supply arrangement with the Government, and a negotiated take-or-pay off take agreement with Petrotrin for 25 years. Favourable demand conditions driven by the importance of the end products and a changing regulatory and macroeconomic environment also serve as a credit driver. Further, assuming a successful start-up of operations in October 2019, we expect favourable financial performance with adequate debt-servicing capacity based on minimum output levels,” CARICRIS said.
CARICRIS noted that an Owner-controlled Insurance Program (OCIP) provides an additional layer of protection to the lenders, and the company’s knowledgeable and experienced board of directors and executive management team also support the ratings. These rating strengths are, however, tempered by NETL’S vulnerability to the cyclicality of global energy prices.