GCR Accords Final Rating of AAA(NG)(sf) to Nigeria Mortgage Refinance Company Plc’s Series 1 Bonds.

30 Mar 2016 In Rating Notifications

GCR Accords Final Rating of AAA(NG)(sf) to Nigeria Mortgage Refinance Company Plc’s Series 1 Bonds.

Lagos, 30 March 2016—Global Credit Ratings has accorded a final, public national scale long-term rating of AAA(NG)(sf) to Nigeria Mortgage Refinance Company Plc’s Series 1 N8bn Bonds; with the outlook accorded as Stable. The rating is valid until July 2016.

Nigeria Mortgage Refinance Company Plc’s (“NMRC”, “the Issuer”) N8bn Bonds (“Series 1 Bonds”) were issued under NMRC’s N140bn Debt Issuance Programme (“DIP”). The DIP is backed by a resolution of the Board of Directors (“Board”) of the Issuer, which authorizes the Issuer to issue the Bonds in series, different forms, and under different terms and conditions as may be deemed fit by the Board. The Series 1 Bonds (pay-through fixed rate notes) will constitute direct, senior secured, unconditional and unsubordinated obligations of the Issuer, ranking pari-passu, without any preference among themselves. In addition, all payment obligations under the Issue (except otherwise provided for by applicable laws) rank at least equal with all other present or future secured or unsubordinated payment obligations of both the Issuer and the Guarantor.

The final public rating accorded to the Series’ Bonds is in respect of ultimate repayment of principal and interest (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity).


RATING RATIONALE

Global Credit Ratings has accorded the above final, public credit rating based on the following key criteria:

Although the Issuer lacks a financial track record, being at a nascent stage, the company enjoys a strong shareholder base, presently made up of two public sector-related entities (jointly accounting for 39.7% of the fully paid up capital) and 20 local financial institutions. The significant likelihood of government support for NMRC, as a public purpose entity, in addition to the assessment of its proposed business model, financial projections and assumptions, and risk mitigation mechanisms, was factored into the Issuer’s national scale long-term rating of BBB+(NG), with Stable Outlook, recently accorded by GCR.

GCR has accorded the Series 1 Bonds a final, public AAA(NG)(sf) national scale long-term rating, as the rating of the Bonds is credit linked to the rating of the Federal Government of Nigeria (“FGN”) in its capacity as Guarantor. The rating accorded to the Series 1 Bonds is solely dependent on the validity of the FGN Guarantee and the ability of the FGN to pay all sums of money the Issuer may have failed to pay when due in accordance with the Series 1 Trust Deed.

GCR received a legal opinion from the solicitor to the Note Trustees, dated 13 May 2015, stating that the FGN Guarantee represents the legal, valid and binding obligations of the Guarantor and is enforceable against it in accordance with the terms of the Guarantee. GCR relied on this legal opinion to accord the rating to the Series 1 Bonds. However, it should be noted that the legal opinion has not been reviewed by external legal counsel. The rating accorded should not be viewed as a replacement of the legal advice that investors should seek on the validity and enforceability of the Transaction Documents and the FGN Guarantee.

Should the rating of the Guarantor change, the rating of the Series 1 Bonds may also change, but not necessarily in the same quantum.


NATIONAL SCALE RATINGS HISTORY

Initial/last rating (not applicable)
Long term: (first time/new rating)
Outlook: (first time/new rating)


ANALYTICAL CONTACTS

Primary Analyst                                                       
Julius Adekeye                                                          
+23 41 462 2545                                                        
.(JavaScript must be enabled to view this email address)

Committee Chairperson
Dave King
.(JavaScript must be enabled to view this email address)

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Banks and Other Financial Institutions, updated March 2015
Global Credit-Linked Note and Repackaging Vehicle Rating Criteria, updated May 2015
Glossary of Terms/Ratios (February 2016).


RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK:  HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.

The rating was solicited by, or on behalf of, Nigeria Mortgage Refinance Company Plc, and therefore, GCR has been compensated for the provision of the rating.

Nigeria Mortgage Refinance Company Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating above was disclosed to Nigeria Mortgage Refinance Company Plc with no contestation of/changes to the rating.

The information received from Nigeria Mortgage Refinance Company Plc to accord the credit rating included the Issuer’s Certificate of Incorporation, Memorandum and Articles of Association, draft risk management policy, draft code of corporate governance and related committee terms, and the draft business plan for up to 2023, the Trust Deed for the Debt Issuance Programme, the Base Shelf Prospectus, the Series 1 Trust Deed, the Series 1 Supplemental Shelf Prospectus, the Security Trust Deed, the Deed of Guarantee, the relevant legal opinion, the Vending Agreement, the Master Purchase, Refinance and Servicing Agreement, the Account Bank/ Paying Agent Agreement. In addition, other information specific to the rated entity and/or industry was also received.

 

 

 

 

 

 

 

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

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