National Commercial Bank Jamaica Limited (NCBJ) will be looking to raise up to US$300 million ($45.3 billion) through the securitisation of its credit card merchant voucher receivables by the end of its financial year (FY) on September 30.

NCBJ originally issued its first securitisation arrangement under merchant voucher receivables in May 2015 and raised US$250 million (series 2015-1 notes) through Jamaica Merchant Voucher Receivables Limited (JMVR). JMVR is a Cayman special purpose vehicle (SPV) to which NCBJ transferred its rights to all future merchant voucher receivables. Amortised quarterly principal payments began in October 2017, with maturity of the notes on July 8, 2022.

“The arrangement involves the sale of future flows due from Visa International Service Association (Visa) and MasterCard International Incorporated (MasterCard) related to international merchant vouchers acquired by NCBJ in Jamaica. A merchant voucher is created when an international Visa or MasterCard cardholder pays for goods or services at an NCB merchant. NCB approves the charge, pays the merchant under contractual terms, and submits the merchant voucher information to Visa or MasterCard for settlement. Upon approval and receipt of the charge information, Visa or MasterCard is obligated to pay the amounts due, and this represents a receivable under the transaction,” NCBJ’s 2021 audited notes stated.

NCBJ raised an additional US$150 million through this securitisation arrangement in September 2016 with quarterly principal payments starting in July 2020 and maturity set for January 2027. The cash flows from the merchant voucher receivables are used to pay the principal and interest payments, with any excess flows transferred to NCBJ.

While Jamaica and NCBJ have credit ratings of B+ from Fitch Ratings, JMVR received a rating upgrade in June on its existing notes from BB+ to BBB–. A rating of BBB– and above is considered investment grade, which opens up the current US$300 million offer to a wider pool of applicable investors. BBB– is considered lower medium grade on the credit scale. NCBJ is currently rated good by the Caribbean Information and Credit Rating Services Limited (CARICRIS) which corresponds to A on their rating scale.

According to a Fitch release, the size of this securitisation programme with JMVR would reach US$406 million upon issuance of the proposed notes. The balance on the programme declined from US$254.21 million in NCBJ’s 2020 FY to US$182.31 million at the end of the 2021 FY. The proposed US$300 million issuance would cover the 2015 notes, which matured in July, and provide the country’s largest commercial bank with more capital for its 2023 FY. Greyfell Capital Management LLC will act as the lead arranger for the offer and place it in the international private placement market. The transaction will also be rated by Fitch.

NCBJ’s diversified payment rights Cayman SPV, Jamaica Diversified Payment Rights Company, also received an upgrade from BB to BB+ by Fitch. The balance on these notes was US$250 million at the end of the 2021 FY, with quarterly payments set to start in March 2024, with maturity in September 2030. The outlook on the notes remains stable.

This raise represents one of the latest in a series of transactions by different subsidiaries of the NCB Financial Group Limited (NCBFG). NCB Global Holdings Limited raised $3.75 billion in March to refinance existing debt on its book while Guardian Holdings Limited’s 5.75 per cent tranche A of its $13.4 billion bond is set to mature this month. NCBJ’s total assets stood at $806.18 billion inclusive of $419.09 billion in loans and advances and $113.32 billion in cash and bank balances as of June, according to Bank of Jamaica data. Total deposits stood at $492.27 billion relative to the $712.34 billion in total liabilities.

NCBFG’s nine months net operating income is up 15 per cent to $105.62 billion, with its net profit attributable to shareholders increasing by 94 per cent to $18.64 billion. However, its capital base for shareholders equity has been reduced by five per cent to $190.42 billion as the group continues to recognise unrealised losses on its investment securities valued under comprehensive income. Total assets stand at $2.02 trillion, which is largely funded by $712.21 billion in deposits and $443.93 billion in insurance contracts. NCBFG’s stock price is down 26 per cent year to date at $92.50, which leaves it with a market capitalisation of $228.17 billion.