Fitch Assigns Ecobank Nigeria Limited's $300m Senior Unsecured Notes 'B-' Final Rating

Proshare

Wednesday, February 17, 2021 / 10:18AM / Fitch Ratings / Header Image Credit: Financial Technology


Proshare Nigeria Pvt. Ltd.


Global credit Rating agency, Fitch Ratings, has assigned EBN Finance Company BV's USD300 million 7.125% senior participation notes due 2026 a final rating of 'B-' with a Recovery Rating of 'RR4'. EBN Finance Company BV is a Netherlands-based special purpose vehicle of Ecobank Nigeria Limited (ENG; B-/Stable/b-). ENG's other ratings are unaffected by this rating action.


The proceeds of the senior notes will be used by ENG for general-banking purposes, including providing the bank with stable medium-term funding.


The final rating is in line with the expected rating that Fitch assigned to the notes on February 10, 2021.


Key Rating Drivers

The senior notes' rating is solely driven by ENG's Long-Term Issuer Default Rating (IDR) of 'B-'. This reflects Fitch's view that default of these senior unsecured obligations would reflect a default of ENG in accordance with Fitch's rating definitions and the transaction documents described in the prospectus.


Fitch has given no consideration to the underlying transaction structure as it believes that the issuer's ability to satisfy payments due on the notes will ultimately depend on ENG satisfying its senior unsecured payment obligations to the issuer under the transaction documents.


The Recovery Rating of 'RR4' reflects average recovery prospects in the event of a default based on country-specific factors.


ENG's 'B-' Long-Term IDR is driven by its intrinsic credit strength, as expressed by its Viability Rating (VR) of 'b-'. The VR reflects the constraint of Nigeria's challenging operating environment, the bank's very high impaired loan ratio, weak profitability and modest core capital buffers. This is balanced by company profile strengths as well as a solid funding profile and good foreign-currency liquidity, supported by ordinary support from Ecobank Group as part of its inter-affiliate placement programme (IAP).


For more details on the rating drivers and sensitivities for ENG, see "Fitch Rates Ecobank Nigeria Limited at 'B-'; Outlook Stable" dated 28th January 2021.


Proshare Nigeria Pvt. Ltd. 


Rating Sensitivities

Factors that could, individually or collectively, lead to positive rating action/upgrade:

  • The notes' rating would be upgraded if ENG's Long-Term IDR was upgraded, which is not our base case given the Stable Outlook.
  • Upside to ENG's IDR is limited at present given the bank's high impaired loan ratio and the ensuing pressure on other financial factors. Upside is contingent on a material improvement in the bank's operating income and profitability, with performance metrics more akin to that of larger banks in Nigeria. This will depend on volume growth and a sustained improvement in asset quality.


Factors that could, individually or collectively, lead to negative rating action/downgrade:

  • The notes' rating would be downgraded if ENG's Long-Term IDR was downgraded, which is not our base case given the Stable Outlook. The IDR could be downgraded in case of a sharp increase in the net impaired loans/Fitch core capital (FCC) ratio, closer to its recent peak of around 50%, or a drop in the FCC ratio to below 10%.


Esg Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.


Best/Worst Case Rating Scenario

 International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings.


Proshare Nigeria Pvt. Ltd.


Related News

1.      Ecobank Holds Stakeholder Engagement Webinar, Launches Religious, Education Products - Feb 15, 2021

2.     Renaissance Capital Leads Landmark US$300m 7.125% 5-Year Eurobond Offering For Ecobank Nigeria - Feb 11, 2021

3.     Ecobank Nigeria Introduces Money Transfer Via SMS, WhatsApp - Feb 09, 2021

4.     Fitch Rates Ecobank Nigeria Limited at 'B-'; Outlook Stable - Jan 29, 2021

5.     Ecobank Nigeria Targets MSMEs With Recent N50bn Subordinated Funding - Jan 28, 2021

6.     Ecobank Nigeria Secures N50bn 10-Year Subordinated Loan - Jan 25, 2021

7.     AfCFTA: Ecobank is Well-Positioned to Make Payments Smooth - Ade Ayeyemi - Jan 19, 2021

8.     Ecobank Nigeria Launches Radio Programme for SMEs - Jan 07, 2021

9.     The Ecobank and Airtel Story: Surviving a Contingent Liability and Equity Sale - Jan 03, 2021

10.  KPMG Names Ecobank Nigeria Among 2020 Customer Experience Leaders - Dec 30, 2020

11.   Banks are Pivotal to Success of AfCFTA - Ecobank MD - Dec 17, 2020

12.  Honeywell to Seek Supreme Court's Review of Court of Appeal Decision on Ecobank Credit - Dec 15, 2020

13.  Ecobank MD, Others List Opportunities in Digital Financial Inclusion - Dec 10, 2020

14.  Ecobank is "Agric Lender of the Year 2020" - BAFI Awards - Dec 01, 2020

15.  Ecobank Nigeria Launches Smart SME Agency Banking Campaign to Empower Small Businesses - Nov 30, 2020

16.  Ecobank Nigeria Launches Smart SME Agency Banking Campaign to Empower Small Businesses -

17.  Wealth Generation: Ecobank Advocates Collaboration Between Economic Stakeholders

18.  Ecobank Nigeria Holds Awareness Webinar on Diabetes

19.  Ecobank to Partner Ogun Government on Agriculture, Empowerment and Health

20. Ecobank Has Best Digital Touch Points in Nigeria - Digital Jurist Awards

21.  Ecobank Named "Best Retail Bank In Nigeria 2020" - Asian Banker Awards

22. Ecobank Advocates More Collaboration between Fintech, Banks, and Telcos

23. Ecobank Restates Commitment to AfCFTA

24. Ecobank Organises Diaspora Summit; Showcases Remittance Products for Nigerians Overseas

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP