TEXT-S&P rates CFG Holdings proposed notes 'B'

Overview
-- CFG Holdings Ltd. and its subsidiary CFG Finance LLC (unrated) are
issuing notes, which will be guaranteed on a senior secured basis by CFG
Holdings' parent, affiliate, and existing and future subsidiaries.
-- We are assigning a 'B' rating to the proposed issuance of up to $178
million seven-year senior secured notes, reflecting the consolidated group's
creditworthiness.
-- We are affirming our 'B-' counterparty credit rating on CFG Holdings,
reflecting its status as a non-operating holding company.
-- The positive outlook on the counterparty credit rating reflects CFG
Holdings' improved profitability, cash flow generation, and asset quality and
our view that the company might maintain this trend in 2013.

Rating Action
On Oct. 19, 2012, Standard & Poor's Ratings Services assigned its 'B'
long-term rating to the up to $178 million seven-year senior secured notes to
be co-issued by CFG Holdings Ltd. (CFGLTD) and its Delaware-based subsidiary
CFG Finance LLC (not rated), subject to receiving final documentation.

We are also affirming our 'B-' counterparty credit rating on CFGLTD. The
outlook is positive.

Rationale
Our rating on the proposed notes is based on an unconditional and irrevocable
guarantee by Caribbean Financial Group Holdings L.P. (parent company), by
Caribbean Financial Group Inc. (affiliate of CFGLTD), and by CFGLTD's
subsidiaries:
-- Island Finance Trinidad & Tobago Ltd. (operating subsidiary),
-- CaribFin LLC (operating subsidiary),
-- Financiera El Sol S.A. (operating subsidiary),
-- CFG NA Holdings B.V. (subsidiary),
-- Island Finance (Bonaire) N.V. (operating subsidiary),
-- Island Finance (Curacao) N.V. (operating subsidiary),
-- Island Finance (Sint Maarten) N.V. (operating subsidiary),
-- CFG Aruba Holdings N.V. (subsidiary),and
-- Island Finance (Aruba) N.V. (operating subsidiary).

All of them, jointly and severally with each other, guarantee the full and
punctual payment of the notes.

The rating assigned to the notes reflects the creditworthiness of the
consolidated operating subsidiaries. The rating is limited by the highly
concentrated funding structure of the group, its current unfavorable maturity
profile, and its modest profitability despite its focus on consumer lending.
The satisfactory market position in each of the markets where the subsidiaries
operate, the adequate consolidated asset quality for its profile, and solid
capitalization metrics are positive credit factors. The counterparty credit
rating on CFGLTD is one notch lower than the notes rating to reflect its
status as a non-operating holding company.

CFGLTD is a holding company that offers unsecured personal loans to low- and
middle-income customers through its subsidiaries located in the Caribbean
(Aruba, Curacao, Saint Maarten, and Trinidad and Tobago) and Panama. Though
the company faces competition from consumer-oriented banks and nonbank finance
companies, in our opinion, it's well positioned thanks to its long-track
record of operations in the region and wide branch network under the "Island
Finance" and "El Sol" brands. We believe the company has a satisfactory market
position based on its loan portfolio, which holds about 2% of total consumer
loans in Trinidad and Tobago and Panama, more than 11% in the former
Netherland Antilles, and nearly 17% in Aruba.

We consider CFGLTD's funding structure as its major rating weakness, since it
is highly concentrated and undermines its financial flexibility. CFGLTD relies
on a single funding source, a revolving credit facility from a commercial
bank, which matures in March 2013, causing a significant maturity gap in the
balance sheet, since the loan portfolio has a 45-month average maturity.
CFGLTD plans to use the proceeds from the notes to pay down its existing
credit line as well as transaction fees and expenses. In addition, the company
plans to obtain a new $25 million facility. Although this would slightly
diversify the company's funding structure, it would remain highly concentrated
compared with that of most of its peers. Although we normally view market debt
as riskier than bank debt, if the company is able to place the issuance with
the desired term of seven years, the balance sheet will be better matched with
the loan portfolio, in our view. We also think refinancing risk would be
mitigated in the medium term. In addition, paying down the current bank
facility might provide financial flexibility to CFGLTD, as it will allow it to
obtain funding from local sources.

As we had expected, a higher net interest margin, lower loan loss provisions,
and the absence of nonrecurring charges have improved CFGLTD's profitability.
As of June 30, 2012, return on average assets and revenues stood at 4.9% and
19.4%, respectively, up from 3.9% and 16.3% as of June 30, 2011. Nonetheless,
we view these profitability metrics as moderate for consumer finance, and
below that of its rated peers'. Under current market conditions, we do not
expect further impairments of goodwill or the divestiture of any subsidiaries
that could weaken CFGLTD's bottom-line results.

CFGLTD's adjusted capitalization and internal capital generation have
improved. In our opinion, the company's capitalization levels are solid and
sufficient to cover unexpected losses and support its growth. As of June 30,
2012, adjusted capitalization (measured as adjusted total equity to adjusted
assets) was nearly 32.6%, up from 28.5% for the same quarter in 2011, and
total debt to equity was 1.3x. Because we expect moderate growth of its loan
portfolio, a positive trend in its internal capital generation, and no
dividend payments, we also expect the company's capitalization ratios to
continue improving gradually.

We consider CFGLTD's loan performance to be satisfactory. In our opinion, the
company has good credit risk management practices and tools for portfolio
monitoring and reporting. Although the company's nonperforming loan ratio has
remained relatively stable, net charge-offs decreased as a result of the
divestiture of the Mexican operation and the centralization of the recovery
functions. Contractual delinquencies (loans more than 60 days past-due)
represented 11.7% of the portfolio at the end of the second quarter of 2012,
while loans more than 90 days past-due 5.1%, with a 94.5% reserve coverage.
Net charge-offs accounted for 3.9% of the portfolio at the end of 2011 (down
from 7.1% in 2010), and 3.9% as of June 2012.

Outlook
The positive outlook on CFGLTD's counterparty credit rating reflects the
improvement in its financial performance, cash flow generation, and asset
quality since 2011, and our view that the company might maintain this trend in
2013. We expect moderate growth of the company's loan portfolio in the next
two years, no deterioration of its asset quality, and a gradual strengthening
of adjusted capitalization.

We could upgrade the company if it maintains the current trend in its
profitability and asset quality metrics and cash flow generation in next 12
months. Improved financial flexibility and the diversification of its funding
sources could also be positive for the ratings.

On the other hand, an increase in nonperforming loans, a sustained decrease in
profitability or capitalization, or unfavorable financing conditions that
increase refinancing risk in the short-term, could have a negative impact on
the ratings.

Related Criteria And Research
-- CFG Holdings Ltd. and Subsidiaries Outlook Revised To Positive, 'B-'
Rating Affirmed, Aug. 24, 2012
-- Group Methodology (Guarantees), April 22, 2009
-- Analytical Approach To Assessing Nonoperating Holding Companies, March
17, 2009
-- Criteria For Reliance On Upstream Guarantees Modified In Response To
Legal Reforms In Latin America, Oct. 25, 2005
-- Rating Finance Companies, March 18, 2004
-- Finance Company Ratios, March 18, 2004
Ratings List
Ratings Affirmed
CFG Holdings Ltd.
Counterparty Credit Rating B-/Positive/--

New Rating
CFG Holdings Ltd./CFG Finance LLC
Seven-year senior secured notes B

Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.