GCR Affirms FCMB Financing SPV Plc’s Series 1, Series 2 and Series 3 Bonds Ratings.

03 May 2017 In Rating Notifications

GCR Affirms FCMB Financing SPV Plc’s Series 1, Series 2 and Series 3 Bonds Ratings.

Lagos, 02 May 2017—Global Credit Ratings has affirmed the national scale long term credit ratings of BBB(NG), A-(NG)  and BBB(NG) accorded to Series1, Series2 and Series 3 Bonds respectively,  issued under FCMB Financing SPV Plc’s N100bn Debt Issuance Programme (“DIP”); with the outlooks accorded as Negative. The ratings are valid until August 2017.

·        Series 1     N26.0bn 7-year Subordinated Notes, issued November 2014
·        Series 2     N23.19bn 5-year Senior Unsecured Bonds, issued November 2015
·        Series 3     N5.1bn 7-year Subordinated Notes, issued December 2016


RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings based on the following key criteria:

While the Issuer is FCMB Financing SPV Plc, ultimate repayment of the obligations under the Issues ultimately depends on the performance of First City Monument Bank Limited (“FCMB” or “the bank” or “the Sponsor”), 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, FCMB’s credit standing, competitive strength and financial position are key rating factors.

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 (together, the “FCMB 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), Negative Outlook (2 notches lower than the Sponsor’s rating of A-(NG)), while the Series 2 Bonds have been accorded a national scale long-term rating of A-(NG), Negative Outlook, in line with the Sponsor’s rating.

A legal opinion from the solicitor to the Trustees of the Series 1, Series 2 and Series 3 Bonds confirms that the undertaking provided by FCMB in respect of all Series issued under the DIP is valid and enforceable against it under the provisions of Nigerian law. 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/ undertaking.

Per the quarterly performance report provided by the Joint Trustee to the Bondholders, in the period to 31 March 2017, the Issuer has met all its obligations under the Series 1, Series 2 and Series 3 Bonds on a timely basis.

With no enhancement, timely payment of the obligations under the Issuances depends on the performance of the Issuer. Hence, the accorded ratings would be sensitive to a positive rating action on the Issuer. Non-compliance with the set covenants, pressure on the Issuer’s performance, and a downgrade in the Issuer’s rating could trigger negative rating actions on the Issues.

NATIONAL SCALE RATINGS HISTORY
Series 1                                                              Series 2                                              Series 3
Initial rating (March 2015)                                    Initial rating (February 2016)               Initial/last rating (February 2017)
Long term: BBB(NG)                                              Long term: A-(NG)                                 Long term: BBB(NG)
Outlook: Stable                                                   Outlook: Stable                                     Outlook: Rating Watch

Last rating (September 2016)                              Last rating (September 2016)                     
Long term: BBB(NG)                                              Long term: A(NG)                                                   
Outlook: Rating watch                                         Outlook: Rating Watch                        

                                                         
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 Criteria for Rating Bank and Other Financial Institutions, updated March 2016
FCMB rating report, 2017
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 ratings were solicited by, or on behalf of, FCMB Financing SPV Plc, and therefore, GCR has been compensated for the provision of the ratings.

FCMB Capital Markets Limited and First City Monument Bank Limited 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 ratings were disclosed to and not contested by FCMB Capital Markets Limited and First City Monument Bank Limited.

The information received from First City Monument Bank Limited and FCMB Capital Markets Limited to accord the credit ratings included the Sponsor’s 31 December 2016 audited annual financial statements (plus four years of comparative numbers), the Programme Trust Deed for the Debt Issuance Programme, the Shelf Prospectus for the Debt Issuance Programme, the Series 1 Trust Deed, the Series 2 Trust Deed, the Series 3 Trust Deed, the Series 1 Supplemental Shelf Prospectus, the Series 2 Supplemental Shelf Prospectus, the Series 3 Supplemental Shelf Prospectus, independent legal opinions on the transaction documents, the Master Bonds Purchase Agreement, as well as up-to-date reports from the Trustees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

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