Wednesday, February 17, 2021 / 10:18AM / Fitch Ratings / Header Image Credit: Financial Technology
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
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.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Factors that could, individually or collectively, lead to negative rating action/downgrade:
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
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.
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