Fitch Ratings has affirmed the ratings assigned to the outstanding series issued by BIB Merchant Voucher Receivables Limited (BIB Panama MV) and BIB Central American Card Receivables Limited (BIB Regional MV) at 'BBB+'.

The Rating Outlook is Stable.

RATING ACTIONS

Entity / Debt

Rating

Prior

BIB Merchant Voucher Receivables Limited

2017-1 08866TAA0

LT

BBB+

Affirmed

BBB+

2018-1 08866TAB8

LT

BBB+

Affirmed

BBB+

BIB Central American Card Receivables Limited

2019-1 05551CAA3

LT

BBB+

Affirmed

BBB+

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

BAC International Bank Inc. (BIB; BB/Stable) is the sponsor of BIB Panama MV and BIB Regional MV. The outstanding series of notes issued by BIB Panama MV are backed by future flows due from Visa International Service Association and Mastercard International Incorporated related to local and international merchant vouchers acquired by BIB in Panama.

The series of notes issued by BIB Regional MV are backed by future flows due from Visa and Mastercard related to international merchant vouchers acquired by BIB's local subsidiaries, in Costa Rica, Guatemala, El Salvador, Honduras and Nicaragua and future flows due from American Express Company (AmEx; A/Stable), related to international merchant vouchers originating in Costa Rica, Guatemala, El Salvador, Honduras, Nicaragua and Panama.

Fitch's ratings address timely payment of interest and principal on a quarterly basis.

KEY RATING DRIVERS

Future Flow Rating Driven by Originator's Credit Quality: The ratings of the outstanding notes issued out of both future flow programs are tied to the credit quality of the originator, BIB. On April 06, 2022, Fitch downgraded BAC International Bank, Inc.'s (BIB) Long Term (LT) Issuer Default Rating (IDR) to 'BB' from 'BB+', removed the Rating Watch Negative and assigned a Stable Rating Outlook. These actions follow the spin-off completion of BIB's owner, BAC Holding International Corp. (BHI, formerly Leasing Bogota S.A. Panama) from Banco de Bogota S.A. (BB+/Stable).

Strong GCA Supports Notching Differential: Fitch uses a going-concern assessment (GCA) score to gauge the likelihood that the originator of a future flow transaction will stay in operation throughout the transaction's life. Fitch assigns a GCA score of 'GC1' to BIB, based on the bank's strategic importance in Central America. The score allows for a maximum of six notches above the Local Currency IDR of the originator, but additional factors limit the maximum uplift.

Several Factors Limit Notching Differential: The 'GC1' score allows for a maximum rating uplift of six notches from the bank's LT IDR, pursuant to Fitch's future flow methodology. However, the rating uplift is currently tempered to four notches for reasons including Fitch reserving the maximum uplift for originators rated at the lower end of the rating scale.

Moderately High Future Flow Debt: BIB's consolidated future flow debt, including the BIB Regional merchant voucher program, BIB's Panamanian merchant voucher program and Banco BAC San Jose's Diversified Payment Rights future flow program, represented approximately 5.6% of total funding and 31.6% of non-deposit funding utilizing financials as of September 2022. Fitch considers BIB's consolidated future flow debt to non-deposit funding ratio moderately high (greater than 30%).

Strength of Merchant Voucher Programs: BIB enjoys a market leading and profitable regional credit card business that drives group banking activities. The company owns the only regional acquirer with a dominant market share. Monthly flows for both transactions have recovered considerably from the low levels observed in mid-2020. When considering rolling quarterly flows over the last three years (October 2019 - September 2022), Fitch expects quarterly DSCRs to be approximately 24.5x for the BIB Regional Program and 16.3x for the BIB Panamanian Program, considering the maximum debt service for the life of the programs. Actual DSCRs over the last four quarters (4Q21-3Q22) have averaged approximately 35.1x for the BIB Regional Program and 22.6x for the BIB Panamanian Program.

Structure Reduces Sovereign/Diversion Risks: The transaction structures mitigate certain sovereign risks by keeping cash flow offshore until collection of periodic debt service. Fitch believes diversion risk is mitigated by agreements obligating Visa, Mastercard and AmEx to make payments to transaction-specific collection accounts controlled by the applicable trustee.

Experience in Merchant Voucher Securitizations: BIB has a strong track record with merchant voucher transactions, having established three existing programs that issued nine different times. Debt service on past and existing issuances has always been paid on a timely basis.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The transaction ratings are sensitive to changes in the credit quality of BIB and of BIB's underlying subsidiaries, primarily BAC San Jose. A downgrade to these ratings could result in a downgrade to the future flow program. The merchant voucher programs could also be sensitive to significant changes in the credit quality of Visa, Amex or Mastercard.

The transaction rating is sensitive to the performance of the securitized business line. The expected quarterly DSCR is approximately 24.5x for the regional program and 16.3x for the Panamanian program considering rolling quarterly flows over the last three years (October 2019-September 2022), and should therefore be able to withstand a significant decline in cash flows in the absence of other issues. However, significant declines in flows could lead to a negative rating action.

No company is immune to the economic and political conditions of its home country. Political risks and the potential for sovereign interference may increase as a Sovereign's Rating is downgraded. However, the underlying structure and transaction enhancements mitigate these risks to a level consistent with the assigned rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The main constraint to the program's ratings is the originator's rating and the operating environments of BIB's subsidiaries. If a positive rating action/upgrade occurs, Fitch will consider whether the same uplift could be maintained or if it should be further tempered in accordance with criteria;

Fitch has revised global economic outlook forecasts as a result of the Ukraine War and related economic sanctions. Downside risks have increased and we have published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB sub-sectors ('What a Stagflation Scenario Would Mean for Global Structured Finance'). Fitch expects Latam's Global Cross-Sector's financial FF transactions in the assumed adverse scenario to experience 'Virtually No Impact' indicating a low risk for rating changes.

Any changes in any of the above-mentioned variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

The future flow ratings are driven by the credit risk of BAC International Bank, Inc. as measured by its LT IDR.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

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