Caribbean Information and Credit Rating Services Limited (CariCRIS) has assigned ratings of CariBBB (Foreign Currency Rating) and CariBBB+ (Local Currency Rating) on its regional rating scale and jmAA- on the Jamaica national scale to the USD 5 million debt issue (notional) to Development Bank of Jamaica Limited (DBJ). The regional ratings indicate that the level of creditworthiness of this obligation, adjudged in relation to other obligations in the Caribbean1 is adequate.

The ratings of DBJ reflect its strategic importance to the Government of Jamaica (GOJ) and the high level of support that it enjoys via loan guarantees and its tax-exempt status. Its relatively low credit risk profile is reflected in lending performed via a wholesale window and the stable, highly experienced and well qualified senior management team, supported by a reputable Board of Directors.

These business strengths are reflected in strong capitalization, positive liquidity gaps and moderate levels of profitability. Tempering the ratings is the fact that DBJ operates exclusively in a highly indebted economy characterized by limited financial flexibility. Government ownership brings in a certain extent of intervention in its operations which may lead to DBJ undertaking a few non-commercial transactions.

The debt overhang from a large GOJ infrastructural loan constrains DBJ’s balance sheet while its credit reserve fund and entrance into micro finance lending increases the credit risk profile of the company. There is also a certain degree of incongruence between DBJ’s development banking and divestment activities. DBJ’s creditworthiness is also constrained by the lack of institutional focus on risk management.

The ratings of DBJ also factor in an element of distress support from the GOJ. DBJ is 100% owned by the GOJ and is used as the vehicle for the GOJ’s implementation of its economic and social programmes. Borrowings received directly from or taken on behalf of the GOJ represent 95% of total interest bearing liabilities as at December 2009. All these loans carry GOJ guarantees, representing an economic and moral obligation on the part of the government to support DBJ. Further, the level of guarantees provided is expected to continue under the IMF programme, based on representation from the Ministry of Finance, and will be rolled over to new loans upon maturity of the existing loans.

Mr. Milverton Reynolds, DBJ’s Managing Director

Mr. Milverton Reynolds, DBJ’s Managing Director, said that the Board and management of the organization were cognizant of the value of submitting the Bank to this independent third‐party assessment exercise. “It is an important move on DBJ’s part,” Mr. Reynolds said, “indicating our commitment to transparency and the value we place on our accountability to the Government and people of Jamaica.” He added that he hoped by undergoing the CariCRIS’ rating exercise, DBJ will be an example for other regional institutions to emulate.

About the company:
Development Bank of Jamaica Limited is a limited liability company domiciled in Jamaica and owned 100% by the Government of Jamaica. The operations and selected assets and liabilities of National Development Bank of Jamaica Limited (NDB) were merged into the Agricultural Credit Bank of Jamaica Limited (ACB) to form the Development Bank of Jamaica Limited (DBJ) on April 1, 2000. With effect from September 1, 2006, under the terms of a Cabinet decision dated July 24, 2006, DBJ took over the operations and selected assets and liabilities of the National Investment Bank of Jamaica Limited (NIBJ). DBJ has shareholding interest in two associated companies – Ackendown Newtown Development Company Limited (33%) and Harmonization Limited (50%).

DBJ’s mandate is to facilitate economic growth and development by providing:
•Appropriate medium and long-term financing solutions (through alliances with Approved Financial Institutions (AFI) and other financiers) in a timely and efficient manner and at attractive interest rates to all entities, with an emphasis on small and medium-sized enterprises

•Direct lending for large projects in strategic areas identified for promoting economic development and
•Management and privatization of national assets and investments

1 The term Caribbean as used here covers the following countries: Bahamas, Barbados, Belize, Costa Rica, Dominican Republic, Guyana, Haiti, Jamaica, Panama, Suriname, Trinidad and Tobago and the following countries in the OECS: Anguilla, Antigua & Barbuda, Dominica, Grenada, Montserrat, St. Kitts & Nevis, Saint Lucia and St. Vincent & the Grenadines. Refer www.caricris.com for a more detailed explanation on CariCRIS ratings and rating definitions.

Caribbean Information & Credit Rating Services Limited
Please visit www.caricris.com for the detailed rating rationale on DBJ
Or contact:
Arjoon Harripaul, Head – Ratings, CariCRIS
tel: 1-868-627-8879 ext 227
e-mail: aharripaul@caricris.com
Annisa Beharry, Rating Analyst, CariCRIS
tel: 1-868-627-8879 ext 226
e-mail: abeharry@caricris.com

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