Business Context and Reporting Period
This Form 6-K filing, dated March 22, 2022, serves as an Information Statement regarding the spinoff of BAC Holding International Corp. ("BHI") from Grupo Aval Acciones y Valores S.A. ("Grupo Aval"). The filing details the demerger (escisión) of Grupo Aval's indirect majority ownership stake in BHI and the distribution of BHI shares to Grupo Aval and Banco de Bogotá shareholders. The transaction, referred to as the "Spinoff," was approved by shareholders and received requisite regulatory approvals. The Colombian Record Date and ADS Record Date for the distribution were set for March 28, 2022.
Key Financial Metrics
The filing provides unaudited pro forma financial information for BHI, reflecting the impact of the spinoff and the prior demerger of Multi Financial Group, Inc. ("MFG").
- Net Income (Nine Months Ended Sept 30, 2021): $334.4 million (including $17.3 million from discontinued operations related to MFG). Pro forma net income from continuing operations was $317.1 million.
- Net Income (Year Ended Dec 31, 2020): $310.9 million (including MFG). Pro forma net income from continuing operations was $305.4 million.
- Total Assets (Sept 30, 2021): $28,178.9 million (Total Liabilities and Equity).
- Total Loans (Sept 30, 2021): $18,018.7 million gross loans.
- Capitalization (Sept 30, 2021): Total equity of $3,308.3 million. Total indebtedness (deposits, financial obligations, etc.) was $23,938.7 million.
- Net Interest Margin (Nine Months Ended Sept 30, 2021): 5.4%.
- Cost of Risk (Nine Months Ended Sept 30, 2021): 1.9% (annualized).
- Dividends: A $750 million extraordinary dividend was approved in September 2021, with a 10-year payment plan. $375 million was paid by December 31, 2021.
Material Changes and Spinoff Details
The primary material change is the corporate restructuring separating BHI from Grupo Aval. Following the Spinoff:
- Ownership Structure: Grupo Aval's shareholders will own approximately 51.5% of BHI. Banco de Bogotá's minority shareholders will own approximately 23.5%. Banco de Bogotá will retain a direct 25% stake in BHI.
- Distribution Ratio: One BHI Share for each Grupo Aval common or preferred share held. ADS holders receive 20 BHI Shares per ADS or cash proceeds if they do not elect to receive shares.
- Listing: BHI shares are listed on the Latinex (Panama) under ticker "BHOL" and are expected to list on the BVC (Colombia) around March 30, 2022.
- Asset Composition: BHI's only material tangible asset is its 100% equity ownership in BAC Credomatic Inc., a leading Central American financial institution operating in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
Guidance, Outlook, and Risks
Management Commentary and Outlook: The Spinoff is intended to simplify the corporate structure, allow for more efficient capital use, and enable independent strategic focus for both Grupo Aval (Colombia) and BHI (Central America). Management expects the separation to eliminate multi-jurisdictional complexities and FX volatility impacts on consolidated statements. BHI aims to maintain its leadership in the Central American payment chain and credit card markets.
Risks and Contingencies:
- Spinoff Risks: BHI has never operated as a standalone public company; compliance with dual listing (Colombia and Panama) may be costly and complex. Historical financials may not reflect future standalone results.
- Regional Risks: Exposure to economic and political instability in Central America, including sovereign debt downgrades, exchange rate fluctuations, and security issues (gangs, drug trafficking).
- Regulatory Risks: Changes in banking laws, interest rate caps (e.g., Costa Rica), and capital requirements across multiple jurisdictions.
- Credit Risk: Deterioration in asset quality, particularly in credit cards and consumer loans, driven by economic downturns or pandemic-related effects.
- Operational Risks: Cybersecurity threats, failure of IT systems, and operational disruptions.
Key Facts for Investor Verification
- Record Dates: Verify ownership status as of March 28, 2022 (Colombian Record Date and ADS Record Date) to confirm entitlement to BHI shares or cash proceeds.
- ADS Election: ADS holders must actively elect to receive BHI shares in a Colombian brokerage account; otherwise, they will automatically receive net cash proceeds from the sale of the shares.
- Trading Suspension: Grupo Aval shares were temporarily suspended on the BVC from March 22 to March 29, 2022, to facilitate the demerger.
- Tax Implications: The Spinoff is not expected to qualify for tax-free treatment for U.S. federal income tax purposes; receipt of shares may be taxable as a dividend.
- Dividend Obligation: Verify the status of the $750 million extraordinary dividend payment plan and the associated financial obligations.
- Pro Forma Adjustments: Review the unaudited pro forma financial information to understand BHI's financial position excluding MFG and adjusted for the stock split (approx. 558.09 to 1).