Fitch Assigns Final ‘B’ to UBA $500m Senior Notes

By Modupe Gbadeyanka

A final ‘B’ rating has been assigned by Fitch Ratings to the United Bank for Africa (UBA) Plc $500 million 7.75 percent senior unsecured notes maturing on June 8, 2022.

A statement issued by the reputable rating firm said the final rating assigned to the Nigerian lender was in line with the expected rating it assigned to the notes on May 23, 2017.

Based on Fitch’s assessment on expected recoveries in a liquidation scenario, a final Recovery Rating (RR) of ‘RR4 (EXP)’ is also assigned to the notes, implying average recovery prospects.

The final RR is also in line with the expected RR Fitch assigned to the notes on May 23, 2017.

Fitch explained that the final rating was in line with UBA’s Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘B’.

“In Fitch’s view, the likelihood of default on these notes reflects the likelihood of default of the bank. According to Fitch’s criteria, a bank’s IDR usually expresses Fitch’s opinion on the risk of default on senior obligations to third-party, non-government creditors as in Fitch’s view these are typically the obligations whose non-performance would best reflect the uncured failure of the entity,” the statement said.

It explained further that, “Where a bank has a Long-Term IDR of ‘B+’ or below, Fitch usually assigns a RR to the entity’s issues.

“RRs provide greater transparency on the recoveries component of Fitch’s assessment of the credit risk of a low-rated issuer’s securities.”

The statement noted that a change in UBA’s IDR would affect the rating of the notes and may also affect recovery prospects and the RR, adding that UBA’s IDRs are driven by the bank’s standalone financial profile, as reflected in the bank’s ‘b’ Viability Rating (VR).

It noted that UBA’s VR and IDRs are primarily sensitive to further asset quality deterioration and capital deterioration as well as continued pressure on foreign currency funding and liquidity.