Ecobank’s $450m 5-Year Eurobond Gets ‘B’ Rating from Fitch

By Dipo Olowookere

The $450 million 9.5% five-year senior unsecured notes issued recently by Ecobank Transnational Incorporated has been assigned a final long-term rating of ‘B’ with a Recovery Rating of ‘RR4’ by top rating agency, Fitch.

In a statement issued on Thursday and obtained by Business Post, it was disclosed that the final rating followed the receipt of documents conforming to information already received in line with the expected rating assigned on April 3, 2019.

The senior notes are rated in line with Ecobank’s Long-Term Issuer Default Rating (IDR) of ‘B’, as they constitute the holding company’s direct, general, unconditional, unsubordinated and unsecured obligations and rank equally among themselves and with all of lender’s other senior obligations.

Fitch opined in the statement that the likelihood of default on the Eurobonds reflects the likelihood of default of the bank holding company and as a result, the rating firm has assigned a Recovery Rating of ‘RR4’ to reflect average recovery prospects in a default scenario based on country-specific factors.

Ecobank’s Long-Term IDR is in turn driven by the group’s intrinsic creditworthiness, as captured by the entity’s ‘b’ Viability Rating (VR), the statement noted.

Ecobank had disclosed that proceeds of the $450 million Eurobond would be used to refinance some of its existing debt (both external borrowing and inter-group funding) and are not meant for equity injections into its banking subsidiaries and therefore will not affect the holding company’s double leverage.

Fitch disclosed that the rating on the senior notes is linked to ETI’s Long-Term IDR, stating that the latter is primarily sensitive to material deterioration in the operating environment of Ecobank’s largest market, Nigeria, which could lead to renewed asset quality deterioration and pressure on the group’s capitalisation.

It further said Ecobank’s Long-Term IDR is also sensitive to a material increase in double leverage and its subsidiaries’ ability to upstream dividends and other cash flow due to potential regulatory restriction.