May 2015 Financial News

NCB completes securitisation of Visa and MasterCard transactions

May 22, 2015

NATIONAL Com-mercial Bank of Jamaica (NCB) announced that a Cayman Islands-based entity raised US$250 million this week in a private placement backed by Visa and MasterCard transactions within the bank's network in Jamaica.

"NCB has advised that they have successfully completed the securitisation transaction," stated NCB in a terse release this week.

It added that the Cayman-based special purpose entity -- called Jamaica Merchant Voucher Receivables Limited -- raised the funds in the USA.

A private placement is basically the oppositie of a public issue. Securities are offered for sale to a pre-determined group of potential investors -- often large financial institutions including banks and mutual funds.

The notes in the private placement were given a BB+ rating by US rating agency Fitch Ratings -- significantly higher than the B- rating given by the agency to Jamaica.

"The notes are backed by future flows due from Visa and MasterCard related to international merchant vouchers acquired by NCBJ in Jamaica," stated Fitch in its release on the matter.

A Visa or MasterCard holder creates a voucher when paying for goods or services from a Jamaican-based merchant within NCB's merchant network. Fitch explained that the merchant presents the voucher to NCB and the bank pays the merchant the amount of the voucher and forwards the voucher to Visa or MasterCard for authorisation and settlement in US dollars.

Visa and MasterCard will each sign a consent and agreement obligating them to make all payments related to the US-dollar international merchant vouchers into an account controlled by the trustee for the benefit of the noteholders, added Fitch.

The rating was positively influenced by the low sovereign risk and NCB's steady growth in card business which represented up to 17 per cent of annual operating profits.

"NCBJ's card business contributes between 10 per cent and 17 per cent of the bank's annual operating profit. The bank's acquiring receivables have demonstrated growth and stability over the long term, including sovereign crises and bank difficulties. NCBJ's market-leading credit card franchise supports a growing level of international VISA and MasterCard merchant vouchers," explained Fitch. "The structure mitigates certain sovereign risks by keeping cash flows offshore until collection of periodic debt service, allowing the transaction to be rated above the sovereign country ceiling. Fitch believes diversion risk is mitigated by consent and agreements obligating VISA and MasterCard to make payments into a collection account controlled by the trustee."

NCB, described as the island's most profitable bank, made J$3.2 billion after-tax net profit for its March 2015 quarter, or 7.0 per cent higher than a year earlier. The group increased profits based on growing revenues to $11.67 billion in the March quarter 2015, compared to $10.3 billion a year earlier.

NCB is incorporated in Jamaica with 47.9 per cent ot its shares held by AIC Barbados Ltd. The ultimate parent company is Portland Holdings Inc incorporated in Canada and is controlled by Michael Lee-Chin, chairman of the bank.

Source:
Jamaica Observer
Friday May 22, 2015    

http://www.jamaicaobserver.com/business/NCB-completes-securitisation-of-Visa-and-MasterCard-transactions_18989313