OREANDA-NEWS. National Rural Utilities Cooperative Finance Corp.'s (CFC) announcement that it expects to record an asset impairment charge in connection with the proposed sale legacy foreclosed asset, Caribbean Asset Holdings LLC (CAH), is credit neutral in Fitch Ratings' view.

Loans to telecommunication entities, which in the past had been built up to approximately 25% of the portfolio and subsequently were the primary driver of elevated nonperforming assets (NPAs) and credit losses, have decreased by approximately 75% over the past five years and now represent under 2% of the portfolio.

CFC gained control of operations of Caribbean-based Innovative Communication Corporation (ICC) in October 2010 and completed the transfer of all the assets and operations into CAH in March 2011. Since the transfer, CFC has worked to stabilize operations and financial performance of the entity in order to eventually sell it off.

CFC and CAH executed a non-binding letter of intent on June 26, 2015 to dispose CAH. CFC expects to record an impairment charge in a range of approximately \\$70 million to \\$90 million. Importantly, the impairment charge will not impact its compliance with debt covenants under its existing indentures and credit facility agreements.

Fitch notes that CAH was a noncore asset and that much of the infrastructure of CAH had been improved such that it was likely that CFC would sell it in 2015. The final disposition of CAH and the association disposition costs noted above are within a tolerable range, in Fitch's view, and are credit neutral to CFC's current rating and outlook. Furthermore, Fitch's view that management will maintain its current focus on CFC's core members is incorporated into the current rating and outlook.