NATIONAL Commercial Bank Jamaica Limited (NCBJ) has completed its US$300-million ($45.2-billion) securitisation programme of its credit card merchant voucher receivables a month earlier than planned as Fitch Ratings gave the Series 2022-1 notes a BBB– investment grade rating and stable outlook.

This transaction was accomplished through Cayman-based special purpose vehicle (SPV) Jamaica Merchant Voucher Receivables Limited (JMVR) whose Series 2015-1 and Series 2016-1 notes were also upgraded from BB+ to BBB– at the end of June. The note will have a 10-year tenor which includes 13 quarters of interest only payments with amortisation on the principal to begin in April 2026. The interest rate on the note will be fixed. The transaction will result in the programme size being US$406 million and cover the July maturity of the 2015 notes which was US$250 million at issuance. The Series 2016-1 note is valued at US$106.14 million, according to Fitch, with an interest rate of 5.625 per cent. After announcing the transaction on August 17, the Series 2022-1 notes were placed on the international private placement market on August 30 when the transaction was closed.

According to Fitch, NCBJ has sponsored seven international merchant voucher future flow issuances since 1991 with all of the retired issuances paid on time despite the sovereign and financial crises, the novel coronavirus pandemic and loss of Air Jamaica which was not only the largest merchant but represented on average 33 per cent of receivables flow. NCBJ currently controls 68 per cent of total credit card transactions and 65 per cent of total debit card transactions in Jamaica for 2021 as per Fitch’s report. NCBJ’s annual receivables was US$625.4 million for 2021 which was above the pre-COVID high of US$603.8 million in 2019.

Fitch had assigned a going concern assessment score to NCBJ of GCA1 which reflected the systematic importance of the being Jamaica’s largest bank. Based on this score, NCBJ’s long-term issuer default rating (IDR) has a maximum uplift of six notches from its current B+ rating while JMVR can be uplifted four notches. However, Fitch noted that the future flows programme will continue to be a primary source of NCBJ’s long-term funding which will limit the rating uplift on the notes.

Despite this fact, Fitch projected a minimum debt service coverage ratio (DSCR) of 7.3 times throughout the life of the [2022] programme and that the US$300-million transaction can withstand a drop of approximately 86.3 per cent in flows and still be able to cover the maximum quarterly debt service obligation which highlights the strength of the flows. JMVR is also endorsed by the United Kingdom and the European Union.

NCBJ’s last major securitisation programme in September 2020 was closed within eight days and was upgraded from US$175 million to a maximum of US$250 million. Jamaica Diversified Payment Rights Company was recently upgraded as well from BB to BB+ by Fitch on the Series 2020-1 notes. Interest became payable quarterly at a rate of 5.25 per cent in December 2020 with quarterly payments set to begin in March 2024. It will mature in September 2030. 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.