GCR Assigns Capital Trust a National Scale Management Quality Rating of BBB(NG)(mq); Outlook Stable

02 May 2017 In Rating Notifications

GCR Assigns Capital Trust a National Scale Management Quality Rating of BBB(NG)(mq); Outlook Stable

Lagos, 01 May 2017—Global Credit Ratings has accorded a national scale management quality* rating of BBB(NG)(mq) to Capital Trust Investment & Asset Management Limited (“Capital Trust” or “the company”); with the outlook accorded as Stable. The rating is valid until October 2017.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above management quality (“mq”) rating to Capital Trust based on the following key criteria:

The management quality rating of Capital Trust reflects Global Credit Rating Company Limited’s (“GCR”) assessment of its corporate profile, financial sustainability, portfolio management skill and experience, and sufficiency of risk management, controls and systems.

The company operates a unique business model, whereby project-specific funds, mobilised from targeted investors via Note issuance, are managed by the company as proprietary portfolios, while the investors are paid guaranteed investment returns. Thus far, the company’s asset management experience has been limited to non-unitised funds. The current staffing level across the key functions is considered low, and while in keeping with the modest operational scale, it exposes the company to key man risk. GCR notes that proposed enhancements to the operational structure, staffing level and quality required by its new mandate to manage Africa Infra Plus Fund (“AIPF”, “the Fund”), a unitised fund sponsored by Africa Plus Partners Mauritius, could support the rating going forward.

Capital Trust’s total capital stood at N317.5m at 31 December 2016, representing an increase of 101.5% over FY15 and translating to a stronger total capital/total assets ratio of 47.1% (FY15: 26.5%). However, the company’s key profitability metrics came under pressure in FY16 (with total operating income (“TOI”) declining by 8.0%), which management attributed to the loss of a key rental income generating mandate during the year. Performance at the pre-tax level was further constrained by escalation in operating expenses to 40.4% of the reported TOI for the year. Consequently, the company ended with a pre-tax profit of N21.4m for the year, representing a decline of 21.3% over FY15.

Portfolio and investment management are performed by a constituted board committee which meets quarterly to review the investment strategy, asset allocation, holdings and transactions in all funds and portfolios, as well as review and approve new products and major investment strategy adjustments, while providing oversight with respect to process and procedures relevant to the portfolio management function. Portfolio construction is in accordance with investment policy guidelines, and benchmarks are set based on asset. So far, assets under management (“AUM”) are managed on a proprietary basis. Reporting and communication are adequate, and implementation of new IT systems will enhance the robustness of the reporting function. Total AUM grew by 10.1% and 22.0% to N209.9m and N256.1m at FY15 and FY16 respectively, and was indicative of fairly strong client retention capacity.

Capital Trust’s risk management structure is considered satisfactory. While risk management responsibility falls within the Board’s general oversight, the internal audit department is responsible for monitoring adherence to the company’s internal control systems, via regular compliance testing and reporting of findings. The internal auditor reports to the Board through the Chief Risk Office (“CRO”). At management level, the risk management function is governed by an enterprise risk management policy, overseen by the CRO, a consultant appointed by the board. The CRO reports directly to the board.

An Improvement in the competitive position, demonstrated capacity to successfully manage new unitised mandates, in addition to establishing and maintaining a satisfactory fund performance track record and stable financial performance. A negative rating action may arise from loss of market share/key clients, and deterioration in financial performance metrics.


*Note that management quality ratings are classified as a non-credit ratings (refer to published rating scales and definitions).

 

NATIONAL SCALE RATINGS HISTORY

Initial/last rating (not applicable)
Management Quality rating: (first time/new)
Outlook: (first time/new)                           
 
                                                         
ANALYTICAL CONTACTS
Primary Analyst                                             
Julius Adekeye                                          
+23 41 462 2545                                        
.(JavaScript must be enabled to view this email address)                     


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


APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Funds and Asset Managers, updated March 2016
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 Capital Trust Investment & Asset Management Limited, and therefore, GCR has been compensated for the provision of the rating.

Capital Trust Investment & Asset Management Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The rating above was disclosed to Capital Trust Investment & Asset Management Limited with no contestation of/changes to the rating.

The information received from Capital Trust Investment & Asset Management Limited and other reliable third parties to accord the rating included the audited annual financial statements of Capital Trust Investment & Asset Management Limited for five years, up to 31 December 2016. 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-SCALE-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.

Copyright © 2013 Global Credit Rating Company Limited. THE INFORMATION CONTAINED HEREIN MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED , IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. The ratings were solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR has been compensated for the provision of the ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information. GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.

Click on logo below to view more information about Global Credit Ratings Africa

Recent Rating Reports

10 Oct 2017: Rand Merchant Bank Nigeria Limited

10 Oct 2017: Leadway Assurance Company Limited

10 Oct 2017: North South Power Company Limited

10 Oct 2017: First Bank of Nigeria Limited

10 Oct 2017: Nigeria Mortgage Refinance Company Plc

10 Oct 2017: Dangote Cement Plc

10 Oct 2017: Fortis Microfinance Bank Plc

10 Oct 2017: Flour Mills of Nigeria

10 Oct 2017: Sterling Investment Management SPV PLC

10 Oct 2017: FSDH Merchant Bank Limited

Purchase Rating Reports

Parties interested in purchasing individual or sectoral rating reports and/or bulletins from Global Credit Rating Company Limited are kindly requested to contact us on the following telephone numbers or email address.

Telephone: (+2341) 462 2648, 460 5001, 0805 615 8393, 0803 352 871

Email: bisi@warltd.com

Email: tunde@globalratings.net

Recent Bulletin Releases
Rating Sectors
Credit Ratings

For a full list of Credit Ratings performed by Global Credit Ratings Company Limited please click here