RATING DRIVERS
Supporting Factors
- High asset quality of the NIF’s underlying assets
- Cash flow adequacy though down in 2020 continues to be supported by stable investment income
- Likelihood of support from the GORTT if needed, notwithstanding declining economic activity
Constraining Factors
- NIF’s cash flows are discretionary and high in concentration risk
- Refinancing Risk applies, given the bond’s structure
Rating Sensitivity Factors:
Factors that could, individually or collectively, lead to an improvement in the ratings and/or outlook include:
- Improvement in the credit risk profile of the GORTT
- Improvement in the credit risk profiles of TGU and RFHL
Factors that could, individually or collectively, lead to a lowering of the ratings and/or outlook include:
- A further deterioration in the credit risk profile of the GORTT over the next 12 months
- A deterioration in the cash flow adequacy ratio to less than 1 time
- A deterioration in the credit risk profiles of TGU and RFHL
- Breach of any covenants of the bond
- An unfavourable capital market environment in T&T given the increased likelihood that Series A (TT $1.2 billion) would need to be refinanced in 2023.
COMPANY BACKGROUND
The National Investment Fund Holding Company Limited (NIF or the Company) is a special purpose investment company created by the Government of the Republic of Trinidad and Tobago (GORTT) to monetize the Government’s assets held in the form of shares of various corporate entities in Trinidad and Tobago (T&T). The NIF issued a bond in the amount of TT $4.0 billion consisting of 3 tranches as follows:
- Series A – TT $1.2 billion with a tenor of 5 years at a fixed rate of 4.5%
- Series B – TT $1.6 billion with a tenor of 12 years at a fixed rate of 5.7%
- Series C – TT $1.2 billion with a tenor of 20 years at a fixed rate of 6.6%
The bond, which was issued in August 2018, is tax free for investors and is structured to remit semi-annual coupon payments. The principal for each tranche will be repaid in the form of a bullet payment upon the maturity of the respective tranche, with provision for portions of Series A and Series B to be refinanced for a further period of 5 years each. The bond’s structure and refinancing element were designed to meet the domestic market’s high preference for 5-year paper. The bond is secured by a debenture on the shares of the companies owned by the NIF, with a total value of TT $9.3 billion as at July 2021 (Table 1), up from TT $7.9 billion as at the date of issue (August 2018)[1].
Table 1
NIF Underlying Assets and Respective Values
The NIF’s income consists primarily of dividends from its underlying assets and is the primary source from which the interest and principal repayments on the bond will be made. A sinking fund was established to accumulate funds that would be applied toward principal repayment.
[1] Based on Trinidad and Tobago Stock Exchange Share prices for RFHL, AHL, OCM and WITCO as at August 8, 2018. TGU’s valuation was completed by Duff and Phelps in July 2018.
Analytical Contacts:
Megan Dass
Tel: 1-868-627-8879 Ext. 239
E-mail: [email protected]
Keith Hamlet
Tel: 1-868-627-8879 Ext. 244
Cell: 1-868-487-8356
E-mail: [email protected]
Website: www.caricris.com
E-mail: [email protected]
Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.