Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the assigned ratings of CariAA- (foreign and local currency ratings) on the regional scale, and jmAAA (local currency rating) on the Jamaican national scale, to the J$13.4 billion bond issue of Guardian Holdings Limited. 

The regional scale ratings indicate that the level of creditworthiness of this debt obligation, adjudged in relation to other obligations in the Caribbean, is high. The Jamaican national scale rating indicates that the level of creditworthiness of this debt obligation, compared to other debt obligations in Jamaica, is the highest.

CariCRIS also maintained a stable outlook on the ratings. The stable outlook is based on the high likelihood that Guardian Holdings’ good financial performance will be sustained over the next 12 to 15 months, driven by the solid performance of its operating subsidiaries.

This is expected to boost dividend income, enabling the company to comfortably meet its debt obligations as they come due.

Additionally, all GHL’s subsidiaries are likely to remain adequately capitalised.

The ratings are supported by GHL’s moderate industry diversification and strong market position of its subsidiaries, particularly in the English and Dutch-speaking Caribbean. GHL’s consistently strong financial performance and robust capitalisation of its regulated subsidiaries also support the ratings.

Furthermore, GHL maintains good liquidity metrics, enhancing its ability to service debt. Moreover, the company’s effective risk management systems further underpin these ratings. These rating strengths are tempered by the structural subordination of cash flows, which may impact timely debt servicing. Additionally, GHL’s current exposure to downside risks in Trinidad and Tobago and Jamaica also tempers the ratings.

Rating sensitivity factors

Factors that could, individually, or collectively lead to an improvement in the ratings and/or outlook include:

• Expansion of the group’s product and service offerings and/or improvements in operating efficiencies leading to improvements in ROEA and ROE to seven per cent and 30 per cent, respectively or more for more than two years.
• An improvement in the credit rating of the Government of Trinidad and Tobago.

Factors that could, individually, or collectively lead to a lowering of the ratings and/or outlook include:

• A fall in GHL’s dividend receipts from the group’s subsidiaries, leading to a fall in the cash flow adequacy ratio below one time sustained for two financial periods.
• A lowering of the ratings of any of the group’s top five reinsurers.
• Loss of relationship with any of the group’s major reinsurers and failure to provide viable replacements.
• A lowering of the credit rating of the Government of Trinidad and Tobago.
•  Breach of covenants stipulated in the final term sheet/prospectus for the bond offering.
• Re-emergence of regulatory constraints on dividends payable by GHL’s major operating subsidiaries.

Guardian’s ultimate parent company is the NCB Financial Group (NCBFG), which owns 61.77 per cent. The other major shareholders of GHL include large corporations across the Caribbean. The ordinary shares of both GHL and NCBFG are listed on the Trinidad and Tobago Stock Exchange (TTSE) and the Jamaica Stock Exchange (JSE).

Notably, while GHL, the parent company, issued the J$13.4 billion bond, repayment will be funded by cash flows generated across the group’s subsidiaries.

As such, CariCRIS is of the view that there is no material difference in creditworthiness between the parent company and the group.