GCR Ratings (“GCR”) has upgraded the national scale issue ratings of First City Monument Bank (FCMB) Financing Special Purpose Vehicle (SPV) Plc’s Series 3 Bonds to BBB+(NG) with a stable outlook.
The Series 3 Bonds were issued in December 2016 under FCMB Financing SPV Plc’s (“the Issuer”) N100 billion Debt Issuance Programme.
The enabling resolution of the Issuer’s Board of Directors permits the Issuer to issue the Bonds in tranches, different forms and under different terms and conditions as it may deem fit, subject to the approval of the relevant regulatory authorities. A statement from the agency noted that the Bonds constitute direct, unsecured, and subordinated obligations of the Issuer and rank pari passu without any preference among themselves, and with every other unsecured subordinated obligation of the Issuer.
The transaction mechanics entails the use of the proceeds from the issuance of the Bonds to purchase subordinated notes issued by First City Monument Bank Limited.
Backed by an irrevocable and unconditional undertaking, the bond issued by the Sponsor supporting all obligations of the Issuer under the programme, based on the Deed of Undertaking between the Sponsor and the Issuer.
While the Issuer is FCMB Financing SPV Plc, repayment of the obligations under the Issues ultimately depends on the performance of the Sponsor, as the direct obligor of the Issues.
Thus, the accorded rating is linked to FCMB’s credit standing and financial position and as such a notch below the Sponsor’s long-term national scale credit rating, as GCR considers the bonds to rank alongside the Subordinated Notes issued by the Sponsor.
The agency noted that FCMB has been accorded a long-term national scale credit rating of A-(NG) with a stable outlook in August 2022.
“According to the periodic performance reports provided to GCR by the Trustees to the Bondholders, dated July 20, 2022, the Issuer has been meeting all its obligations on a timely basis on both the Bonds.
“The Stable Outlook reflects GCR’s expectations that FCMB will maintain its relatively low credit losses and avert further weakening of its non-performing loan ratio and capitalisation over the next 12-18 months.
“Given that the ability of the Issuer to meet its obligations under these Issues is dependent on the financial condition of the Sponsor, the accorded rating would be sensitive to a positive rating action on the Sponsor. Non-compliance with the set covenants, as well as a downgrade of the Sponsor’s rating could trigger negative rating actions,” the statement read in part.
The credit rating, according to GCR, has been disclosed to First City Monument Bank Limited and FCMB participated in the rating process via telephonic management meetings, and other written correspondence.
Furthermore, the quality of information received was considered adequate and has been independently verified where possible, it stated.
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