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NCB to securitise up to US$250m of credit card receivables

Published:Tuesday | March 31, 2015 | 11:04 PM

National Commercial Bank Jamaica Limited (NCBJ) notified the local stock market on Monday that it plans to bundle its future flows of international merchant voucher receivables, and issue the security to "selected debt investors".

Days before, on March 25, ratings agency Fitch indicated that it would rate up to US$250 million of the pending series 2015-1 notes - to be issued by NCBJ subsidiary, Jamaica Merchant Voucher Receivables Limited - at 'BB+(EXP)' with a "stable rating" outlook.

Fitch notes that NCBJ's card business contributes between 10 per cent and 17 per cent of the bank's annual operating profit.

NCBJ pointed back to the "up to" US$250 million cited in the Fitch release, when asked the size of the offer. The bank has previously securitised such receivables, but said the pending transaction is not a rollover offer.

"As indicated in our release to the Jamaica Stock Exchange, the terms of the transaction have not been finalised. This includes the total value," the bank told Wednesday Business.

NCB also said the issue would not be offered to locals, but asked to explain what appeared to be a first-time alert to the Jamaican stock market on this type of transaction, it said vaguely: "The transaction has not yet occurred. We consider the notification to be timely."

The issue is backed by current and future receivables due from card companies Visa and MasterCard for international USD-denominated merchant vouchers acquired by NCBJ in Jamaica.

"An international Visa or MasterCard holder creates a voucher when he or she pays for goods or services from a Jamaican-based merchant that is part of NCBJ's merchant network," said Fitch.

"The merchant presents the voucher to NCBJ 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 USD international merchant vouchers into an account controlled by the trustee for the benefit of the note holders," the rating agency explained.

NCBJ is an acquiring and issuing partner of both Visa International Service Association and MasterCard International Incorporated in Jamaica.

"The bank's acquiring receivables have demonstrated growth and stability over the long term," said 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."