13.12.2012 01:25

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North American Development Bank -- Moody's rates North American Development Bank's bond issue Aaa


New York, December 12, 2012 -- Moody's rated the North American Development Bank's (NADB) USD 50 million, 18-year, 3.0%, senior unsecured bond issue Aaa with a stable outlook.

RATINGS RATIONALE

The Aaa rating reflects the NADB's strong capitalization, high liquidity level as required by the bank's liquidity policy, the involvement of the US Treasury and the Mexican Secretaría de Hacienda y Crédito Público in loan approvals and other aspects of management, and the expectation of strong shareholder support in the event of financial stress.

Jointly owned by the governments of Mexico (Baa1 Stable) and the United States (Aaa negative), NABD finances environmental infrastructure projects in the border regions of the two countries. The Board of Directors, which must approve all loans, includes government officials from both countries and is chaired on a rotating basis by the US Secretary of the Treasury and the Mexican counterpart, the Secretario de Hacienda y Crédito Público. This high-level of oversight plays a role in the policies set and risks taken on by the Bank. It also reinforces member support as there is reputation risk for the two governments should NADB experience financial difficulties.

The Bank has total capital of $3 billion, of which $405 million is paid-in and available for loan operations under its International Program, and the remainder is callable. The US and Mexico subscribe capital in equal amounts. The callable portion of the capital can only be used to repay debt or to make similar payments on loans that it guarantees. It therefore provides considerable protection to bondholders, a factor in Moody's Aaa rating. While Moody's looks at measures of capital adequacy that include the callable capital of Aaa/Aa-rated members, NADB has an exceptionally strong position even without this enhancement. At end-2011 the Bank's ratio of usable equity-to-risk assets was 348.3%. Adding the callable capital pledged by the US ($1,275 million) to usable equity results in a ratio of 1,219.4% of risk assets, among the strongest in the multilateral development bank (MDB) universe.

Moody's assesses the Bank's liquidity policy as very strong, both in the number of months of coverage (12) and the breadth of coverage of cash outflows. For the current fiscal year, the minimum requirement under the Bank's liquidity policy is $160 million, and actual liquid asset holdings were $350.6 million as of December 31, 2011. This represented 42.8% of total assets and 126.3% of total debt, a very strong position which compares favorably with other MDBs at this rating level.

Based on its financial strength, it is highly unlikely that the Bank would need to resort to a call on capital in order to fulfill its debt obligations and for this reason Moody's maintains a stable outlook on the Bank's rating despite the US having a negative outlook as of August 2011. Furthermore, despite the US's negative outlook, Moody's considers the support that the Bank receives from the US to be very strong, both in ability and commitment.

NADB's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside NADB's core industry and believes NADB 's ratings are comparable to those of other issuers with similar credit risk.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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Annette Swahla Analyst Sovereign Risk Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Bart Oosterveld MD - Sovereign Risk Sovereign Risk Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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