Sagicor Financial Corporation’s 174 years of registration in the Caribbean may be coming to an end as the company considers redomiciling in a bid to improve its credit rating.
Standard & Poor’s (S&P) cut its ratings on Barbados-registered Sagicor to BB-, from BB+, at the end of last year. That downgrade came about because of S&P’s decision to reduce Barbados’ sovereign rating to B from BB-. Under its rules, no entity can have a rating that is over two notches higher than the sovereign rating of the country it is based in.
Unfortunately for Sagicor, which S&P said is eligible for a potential rating of BB+ on a standalone basis, that means its ratings are now capped at BB-. As a result, the company is now looking at the possibility of redomiciling to reclaim its former BB+ rating.
Sagicor’s board of directors has already approved a recommendation to relocate its registered office from Barbados to another jurisdiction that holds an investment grade rating, thereby giving it better access to capital which will allow it fund future growth and development, as well as other value creating business opportunities. The company’s management is now investigating what options are available to it.
“The Sagicor Group needs to restore its credit rating,” the company said.
“Credit ratings are extremely important to financial services companies. Credit ratings have achieved wide investor acceptance as tools for differentiating credit quality. Investors use these ratings as a measurement to determine the financial status of companies.
“Although financially prudent, with strong capitalisation, improving operating performance and a strong competitive position, Sagicor Group's ratings will continue to be impacted by changes in the rating of Barbados.”
While Sagicor is yet to decide upon where to redomicile, the US, Luxembourg, the UK, Ireland and Trinidad and Tobago are all being considered, although it is not limiting itself to just these locations.
“A recommendation will be made only after a rigorous evaluation process is completed,” Sagicor said.
“There are several steps involved in this process, and subject to shareholder approval, we expect to have it completed by the end of 2015.”