Fitch Upgrades Banco Agromercantil, Mercom Bank & Agromercantil Sr Trust's Ratings

NEW YORK--(BUSINESS WIRE)-- Following Bancolombia S.A.'s (Bancolombia) recent acquisition of a majority stake of Grupo Agromercantil Holding, S.A. (GAH), Fitch Ratings has upgraded the long-term foreign currency Issuer Default Ratings (IDRs) of Banco Agromercantil de Guatemala, S.A. (BAM) and Agromercantil Senior Trust's senior unsecured notes (AST) to 'BB+' from 'BB' and their long-term local currency IDRs to 'BBB-' from 'BB'.

Also, Fitch has upgraded BAM and Mercom Bank Limited's (Mercom) long-term national ratings to 'AAA(gtm)' from 'A+(gtm)'. BAM, Mercom and AST's ratings have been removed from Rating Watch Positive, which it was placed on Oct. 30, 2015, and assigned a Stable Rating Outlook. This transaction has no impact on BAM's Viability Rating (VR) as it reflects the bank's intrinsic credit profile. See the full list of rating actions at the end of this release.

The ratings upgrades are based on Fitch's view of Bancolombia's ability and propensity to support GAH and its subsidiaries if needed, even in the event of sovereign or macroeconomic stress in Guatemala (local and foreign currency IDRs of 'BB' with Stable Outlook). The transaction to increase Bancolombia's stake in GAH to 60% from 40% was completed on Dec. 30, 2015.

KEY RATING DRIVERS

BAM's IDRs, NATIONAL RATINGS AND SUPPORT RATINGS

BAM's IDRs and national ratings reflect Fitch's opinion that the support from its ultimate shareholder, Bancolombia ('BBB+'/Stable Outlook) will be timely and sufficient if needed. In the agency's opinion, BAM is an important subsidiary for Bancolombia, based on its role in Bancolombia's expansion and diversification in Central America. Bancolombia's propensity to support its new subsidiaries is influenced by the relevant reputational risk that a default from any of these entities would pose to Bancolombia, resulting in a Support rating of '3'. According to Fitch estimates, BAM accounted for approximately 5% of Bancolombia's consolidated assets (including BAM's assets) and consolidated net income, as of September 2015.

MERCOM'S NATIONAL RATINGS

Mercom's national ratings are based on the support it would receive from its ultimate shareholder, Bancolombia, if needed. Mercom is an important subsidiary for the group in Guatemala given it operates in complementary market segments enhancing BAM's business model and reflects a high degree of integration.

AST

AST's rating is aligned with BAM's IDR reflecting that the senior unsecured obligations rank equally with the bank's unsecured and unsubordinated obligations.

RATINGS SENSITIVITIES

BAM

BAM's foreign currency IDR is capped by Guatemala's country ceiling. The bank's long-term local currency IDR is above the sovereign's local currency IDR and as such would be sensitive to any sovereign rating action. Downward risk for the bank's IDRs, national ratings and support rating is limited given its parent support but the ratings could be downgraded if Fitch's assessment of Bancolombia's ability or willingness to support its subsidiaries changes. Currently, there is no upside potential for the bank's IDRs as these are above the sovereign's IDRs, which have a Stable Outlook.

MERCOM

A downgrade in Mercom's ratings is contingent on Bancolombia's ability and propensity to support its operations if needed.

AST

Changes in the notes' rating would derive from changes in the same direction in BAM's IDR.

Fitch has taken the following rating actions:

Banco Agromercantil de Guatemala, S.A.

--Long-term foreign currency IDR upgraded to 'BB+' from 'BB';

--Short-term foreign currency IDR affirmed at 'B';

--Long-term local currency IDR upgraded to 'BBB-' from 'BB';

--Short-term local currency IDR upgraded to 'F3' from 'B';

--Support rating upgraded to '3' from '5';

--Support rating floor of 'NF' was withdrawn.

--National scale long-term rating upgraded to 'AAA(gtm)' from 'A+(gtm)';

--National scale short-term rating upgraded to 'F1+(gtm)' from 'F1(gtm)'.

Agromercantil Senior Trust

--Long-term foreign currency loan participation notes upgraded to 'BB+' from 'BB'.

Mercom Bank Limited

--National scale long-term rating upgraded to 'AAA(gtm)' from 'A+(gtm)';

--National scale short-term rating upgraded to 'F1+(gtm)' from 'F1(gtm)'.

The ratings were removed from Rating Watch Positive and assigned a Stable Outlook.

The following rating is unaffected:

Banco Agromercantil de Guatemala, S.A.

--Viability Rating of 'bb'.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

National Scale Ratings Criteria (pub. 30 Oct 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997648

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997648

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160108005817/en/

Fitch Ratings
Primary Analyst (BAM & AST)
Diego Alcazar
Director
+1-212-908-0396
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Primary Analyst (Mercom); Secondary Analyst (BAM & AST)
Rolando Martinez
Director
+503 2516-6619
or
Secondary Analyst (Mercom)
Rene Medrano
Senior Director
+503 2516-6610
or
Committee Chairperson
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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