Fitch Downgrades Black Gold Re Ltd. to 'BBB' Following Ecopetrol S. A. and Sovereign Downgrades
The rating action follows Fitch's downgrade of Colombia's Long-Term Local Currency Issuer Default Rating (IDR) to 'BBB' from 'BBB+' with a Negative Outlook.
KEY RATING DRIVERS
The downgrade of Black Gold's IFS rating is due to the downgrade of the Long-Term Local Currency IDR of its parent Ecopetrol S. A. (Long-Term Local Currency IDR 'BBB'/Outlook Negative), which in turn reflects the downgrade of Colombia's sovereign ratings. The Negative Outlook on Black Gold's IFS mirrors that of its parent's Long-Term Local Currency IDR.
Fitch considers BGRE as a core captive reinsurance company to Ecopetrol based on the operational and financial support of its parent and because it only reinsures risks coming from Grupo Ecopetrol (GE). In addition, the strategy of the captive reinsurer is aligned with the risk management of Ecopetrol.
The credit quality of Ecopetrol is linked to the sovereign given their strategic importance for the country.
The sovereign rating action reflects the updated guidance contained in Fitch's revised Sovereign Rating Criteria dated July 18, 2016. As part of a broader portfolio review, Fitch concluded that the credit profile of Colombia no longer supports a notching up of their Long-Term Local Currency IDR above the Long-Term Foreign Currency IDR. This reflects Fitch's view that neither of the two key factors cited in the criteria that support upward notching of the Long-Term Local Currency IDR are present for Colombia. Those two key factors are: (i) strong public finance fundamentals relative to external finance fundamentals, and (ii) previous preferential treatment of Local Currency creditors relative to Foreign Currency creditors.
Colombia's Negative Rating Outlook reflects the country's increasing vulnerability to changes in investor sentiment and external financing conditions as current account deficit reached 6.4% of GDP in 2015. Colombia's Negative Outlook also reflects the agencies expectation that external indebtedness will remain high over the forecast period as foreign direct investment (FDI) could finance only half the current account deficit, and the negative impact of a the central government deficit and Colombian Peso's (COP) sharp depreciation could have on credit metrics.
RATING SENSITIVITIES
The Negative Outlook mirrors the outlook of its Parent Ecopetrol. Negative changes to Ecopetrol's ratings or to its ability and willingness to provide support could result in a downgrade for BGRe. In addition, the Negative Outlook of Ecopetrol reflects the main factors that could lead to a downgrade of Colombia's sovereign ratings.
Комментарии