INTERNATIONAL RATING agency Standard & Poor's has followed its November 2 downgrade of Jamaica's long-term sovereign credit from CCC+ to CCC with parallel markdowns of the island's credit card merchant voucher receivables, as well as the long-term corporate credit ratings for national carrier Air Jamaica and the National Commercial Bank of Jamaica (NCB).

The latest downgrades came days after the resignation off Central Bank Governor Derick Latibeaudiere, who S&P described as the lead negotiator within the framework of a possible standby facility from the International Monetary Fund (IMF).

The agency also fears a distressed debt default.

But the adjustments on the corporate credit ratings is more a policy matter, in line with agency rules that companies cannot be rated higher than the sovereign territories in which they are domiciled.

S&P adjusted ratings on NCB, including its long-term counterpart credit rating, to CCC from CCC+ on Monday at the same time as it lowered the 'survivability' assess-ment on the bank to B from B+.

Continued pressure

According to another S&P analyst, Alfredo Calvo, the downgrade for NCB was premised on the very large exposure to Jamaica's sovereign debt securities and loans to public entities, noting as well that the more challenging conditions for the banking system would continue to pressure the financial performance of the bank.

S&P noted, however, that it would still maintain the bank's survivability at three notches higher than its credit rating, reflecting the belief that the government will give "certain assistance to the bank if needed."

On Wednesday, S&P also rated the Jamaica credit card merchant voucher receivables Master Trusts US$225 million floating rate certificate series 2001-A, due 2013, down from B+ to B.

"Our rating on the series 2001-A certificate reflects our long term credit rating on Jamaica (CCC/ Negative); our foreign and local currency ratings on National Commercial Bank Ltd (CCC/ Negative/C); and the 'B' survivability assessment on NCB which addresses the banks ability to acquire the necessary Visa and Mastercard merchant voucher assets to service the transaction even under a state of selective default or other financial impairment."

On Tuesday, Air Jamaica was also downgraded to CCC, with negative outlook.

The airline has two bonds with combined face value of US$375 million on the market, both backed by "unconditional" government guarantee. The bonds mature in 2015 and 2017.

Deal to come

Government, S&P says, owns 72.3 per cent of the carrier's shares.

The carrier is being sold, but a deal is yet to be announced.

Commenting on the parallel downgrade of credit card receivables, S&P noted, as well, that while the Trust's performance has been strong since 2001, when NCB sold all of its existing and future rights to receive US$ payments from Visa International Service Associa-tion and Mastercard Inc, a change was detected at September 30, 2009 when the series 2001-A transaction's quarterly debt service coverage ratio (DCR) was 7.01x, a decrease from historical levels.

"This lower DCR reflects, in our view, a decline in collections due to the global economic downturn and the fact that the transaction has finished its interest-only payment period and has begin paying principal. The 7.01x meets our criteria requirements for a 'B' rating," S&P said.

avia.collinder@gleanerjm.com