Bangkok--4 Dec--Fitch Ratings Fitch Ratings (Thailand) Limited has today assigned a National Long-term ‘AA(tha)’ rating to Central American Bank for Economic Integration’s (CABEI) THB2.374 billion senior unsecured bonds with a maturity of 10 years, due 2017, to be issued in Thailand. CABEI currently has a Long-term foreign currency Issuer Default Rating (IDR) of ‘BBB+’ with Stable Outlook, and Short-term foreign currency IDR of ‘F2’. CABEI is currently rated two notches below Thailand’s international Long-term local currency IDR of ‘A’ with Stable Outlook. This, in turn, results in the National rating of the bonds being approximately two notches below Thailand’s sovereign National rating of ‘AAA(tha)’. Any rating divergence between CABEI and Thailand may affect the issue’s National rating. CABEI is a Central American Multilateral Development Bank (MDB) based in Honduras. It is not subject to local regulation and is exempt from taxation. It is currently 59% owned by its so-called five founding member states - Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The remaining shares belong to five non-regional members: Argentina, Colombia, Mexico, Taiwan and Spain. CABEI's objective is to fund development projects in Central America by channeling medium and long term foreign currency resources to both public and private institutions. In the past five years, it has provided around 62% of total MDB funding to Central America. CABEI is regulated by a Constitutive Agreement signed by its member countries. This agreement, which confers on it the status of a supranational institution, grants CABEI several privileges. Like other MDBs, CABEI does not collect deposits. In recent years its funding structure has been evolving thanks to its strategy of participating actively in international capital markets, reducing the share of credit lines from non-regional commercial banks and development agencies. Also CABEI’s ample capital base funds an important part of its assets. In the last 10 years, the share of funds provided by different issuances in the international capital markets has increase to almost 50% of total funding, whereas in 1996 CABEI procured its funding mostly through credit lines. The bank has successfully tapped markets in the US, Taiwan and Singapore through medium-term notes, and has also recently issued in some Latin-American markets like Colombia, El Salvador and Mexico, in order to further diversify its funding sources. Also CABEI plans to access funding in other Latin American and Asian markets in 2008. CABEI’s ratings reflect its preferred creditor status and privileges conferred on it by its member countries, as well as its solid fundamentals, including a strong capital base, good asset quality and an established track record in terms of self sustainable profitability. The ratings are limited by the volatility of the economic environments in which the institution operates, its significant loan concentration and the member countries’ creditworthiness. The ratings also factor in it’s higher than average exposure to the private sector compared to other regional MDBs. The robust growth registered since end-2004 surpassed the increase in CABEI’s equity, though the bank still shows ample capitalisation ratios. The inclusion of Spain, as a non-regional shareholder in 2004 also benefits the quality of CABEI callable capital, given the former’s ‘AAA’ rating. The bank’s usable capital/required capital ratio remains relatively strong at 2.6x compared to the average of other MDBs. CABEI's five largest consolidated borrowers (the public sector loans to the founding members) accounted for 1.4x equity at end-June 2006, reflecting a significant concentration in its loan portfolio. Substantial exposures to Honduras and Nicaragua have been restructured in recent years through the World Bank and IMF’s Highly Indebted Poor Countries (HIPC) initiative, which has allowed CABEI to maintain strong asset quality despite these countries’ economic problems. CABEI has a significant (40% of loans) exposure to private sector borrowers who do not fall under the protection of preferred creditor status, unlike most MDBs, where lending is highly concentrated in public sector borrowers for whom the lenders benefit from preferred creditor status. Like other MDBs, 25% of the capital has been paid in; the remaining shares could be called in the event of the bank being unable to honor its debt obligations. CABEI's key role of channeling hard currency resources to the region, its shareholders’ willingness to provide support, should this be required, is undoubted. However, given its member countries’ credit ratings, some question remains as to their ability to provide such support. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Contact: Vincent Milton, Bangkok +662 655 4759; Franklin Santarelli, New York +1 212-908-0739. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. 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