By Dipo Olowookere
Indigenous rating agency, Global Credit Ratings (GCR) has announced the lowering of the national scale long term credit ratings accorded to Series 1, Series 2 and Series 3 Bonds, issued under FCMB Financing SPV Plc N100 billion Debt Issuance Programme.
A statement issued by the form said it downgraded ratings of the Series 1, Series 2 and Series 3 Bonds to BBB-(NG), BBB+(NG) and BBB-(NG) respectively; with the outlooks accorded as Stable.
Business Post reports that FCMB Financing SPV had in November 2014 issued the Series 1 N26.0 billion 7-year Subordinated Notes, then in November 2015 issued the Series 2 N23.19 billion 5-year Senior Unsecured Bonds, issued November 2015, and in December 2016 floated the Series 3 N5.1 billion 7-year Subordinated Notes.
GCR stated that while the issuer is FCMB Financing SPV Plc, ultimate repayment of the obligations under the issues ultimately depends on the performance of FCMB Limited as the direct obligor of the issues.
“The sponsor irrevocably and unconditionally undertakes to the Trustees the due and punctual payment, in accordance with the Trust Deeds, of the principal of and interest on all Bonds and of any other amounts payable by the Issuer under the deeds.
“As such, the accorded ratings are linked to FCMB’s credit standing and financial position.
“The bank’s profitability metrics weakened in FY17, with pre-tax profit declining by 31.0% to N9.6 billion, although cognisance was taken of the fact that performance in FY16 was partly supported by a significant foreign exchange revaluation gains of N26.5 billion.
“A pre-tax profit of N5.1 billion was achieved in the first half of FY18, representing a 6.9 percent improvement over FY17, although lagging the forecast for the full year on an annualised basis,” the statement said.
GCR said the rating accorded to each series reflects the nature (Senior or Subordinated) of the FCMB Bonds purchased with the proceeds of the particular Series. The Subordinated Bonds and Senior Bonds (issued by FCMB, are backed by an irrevocable and unconditional undertaking by the bank, which effectively guarantees the timely honouring of all its obligations under the Issues.
“Thus, the Series 1 and Series 3 Bonds have been accorded a national scale long-term rating of BBB-(NG), Stable Outlook (2 notches lower than the Sponsor’s rating of BBB+(NG)), while the Series 2 Bonds have been accorded a national scale long-term rating of BBB+(NG), Stable Outlook, in line with the Sponsor’s rating,” it said.
“Per the quarterly performance report provided by the Joint Trustee to the Bondholders, in the period to 31 August 2018, the Issuer has been meeting all its obligations under the Series 1, Series 2 and Series 3 Bonds on a timely basis.
“The accorded ratings would be sensitive to a positive rating action on the Sponsor. Non-compliance with the set covenants, as well as a downgrade in the Sponsor’s rating could trigger negative rating actions on the Bonds,” GCR added.
