GCR Rates Union Bank of Nigeria’s Proposed N13.5b Bonds

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By Modupe Gbadeyanka

Lagos-based rating agency, Global Credit Ratings (GCR), has assigned an indicative public rating of ‘BBB+(NG)’ to both Union Bank of Nigeria Plc’s proposed N7.2 billion Series 1 Fixed Rate Bonds and N6.3 billion Series 2 Fixed Rate Bonds, with the outlook accorded as stable.

A statement issued by GCR disclosed that it would accord its final ratings on the papers upon receipt of satisfactorily signed and executed final transaction documents.

Union Bank, a commercial bank in Nigeria offering a portfolio of banking services to individual, SMEs, commercial and corporate clients, has filed an application with Securities and Exchange Commission (SEC) to issue bonds in the Nigerian capital market, under a N100 billion Debt Issuance Programme (DIP).

Under the DIP, the bonds would be issued in Series, with an initial Issuance of N13.5 billion expected to be raised in two Series; Series 1 and Series 2.

While Series 1 Bonds will have a maturity tenor of three (3) years, Series 2 Bonds will be seven (7) years.

The principal amount on each Series shall be repaid in full on the relevant Maturity Date, while the interest is payable semi-annually in arrears, in equal payments, up to and including the Maturity Date.

The Series 1 and Series 2 Bonds constitute direct, unconditional, unsecured and senior obligations of the financial institution.

According to GCR, its ratings reflect Union Bank’s status as a mid-sized player within Nigerian banking sphere by balance sheet size, its improved capitalisation, strong shareholders’ support, and sustained profitability, affirming the lender’s long-term rating at ‘BBB+(NG)’ with a stable outlook in July 2018.

GCR stated in the statement that the Programme Trust Deed features a negative pledge and other covenants to protect the interests of the bondholders. As at September 7, 2018, there were no covenant breaches.

“The indicative, public, national scale long term credit rating accorded to each Series reflects the nature of the Series’ Bonds as senior unsecured obligations of the Issuer, ranking at least equally with all other senior unsecured indebtedness of the Issuer, present and future. The ratings relate to ultimate payment of principal and interest.

“Given that the Bonds have no enhancement, timely payment of the obligations is dependent on the performance of the Issuer.

“Hence, the accorded ratings would be sensitive to subsequent rating actions on the Issuer. The final ratings will be accorded upon receipt of satisfactorily signed and executed final transaction documents,” the rating firm said.

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