Caricom establishes rating agency
-to assess corporate, public agency bond risk
Stabroek News
May 28, 2004
Barbados and other Caribbean Community states have set up their own rating agency. In addition, CRISIL Limited, India's leading ratings, financial news, risk and policy advisory company, has acquired nine per cent stake for $300,000.
According to a report in the Barbados Advocate, the agency, Caribbean Information & Credit Rating Agency Limited, has a capital base of US$3M. It will be the world's first regional credit rating agency offering rating products in 19 countries. These include the Bahamas, Barbados, Belize, Costa Rica, Dominican Republic, Guyana, Haiti, Jamaica, the OECS, Panama, Suriname and Trinidad & Tobago.
The agency will rate public agencies and corporations that issue bonds in the Caribbean. The initiative has been pushed by Republic Bank and the Caribbean Money Market Brokers who want to create a secondary market for such bonds. While bonds are practically non-existent in Guyana, Trinidad and Jamaica have a vibrant bond market and the credit rating should help issuers snag a larger pool of overseas investors who would be assured by the rating. Typically issuers pay the agency for the rating that requires close scrutiny of a company's books.
The management of the agency will be strongly independent of its board whose members may have interests in bond offerings. The board held its first meeting in early May in Trinidad.
The Barbados Advocate reports that the agency will have central banks from Organisation of East Caribbean States, Barbados and Trinidad & Tobago as the equity partners.
The other shareholders in the Caribbean agency are United States and United Kingdom-based banks. "TNT Citibank and TNT Scotia are among some of the investors," said Crisil executive director & chief rating officer, Roopa Kudva. This is the second investment by CRISIL in an overseas market within a span of four months. In December 2003, Crisil acquired full ownership of the UK-based EconoMatters, a company involved in gas strategy consulting, publication and training business.
CRISIL's managing director and CEO, R Ravimohan has joined the agency's board. "This marks an important landmark in CRISIL's international initiatives in the ratings business. CRISIL has pioneered and successfully built up a world-class ratings operation in an emerging market environment. The Caribbean initiative provides CRISIL the opportunity to transfer this unique capability outside Indian shores," Ravimohan stated.
Crisil has said that it would be providing technical assistance to the agency to establish and stabilise its operations.