Modupe Gbadeyanka
By Modupe Gbadeyanka
An indicative, public national scale long term rating of BBB(NG) has been assigned to Fortis Microfinance Bank Plc’s N10 billion Bonds by Global Credit Ratings (GCR); with a Stable Outlook.
According to GCR, the indicative credit rating was accorded to Fortis because its strong competitive position in the Nigeria microfinance banking subsector, being one of only two microfinance banks listed on the local bourse and one of eight MFBs licensed to operate nationally in the country presently.
Fortis’ performance was mixed over the review period to FY16. Steady improvement in profitability was recorded in the three years to FY14, followed by declines in FY15 and FY16. An after tax profit of N571m was reported for the FY16 year, representing a 2.2% decline over FY15.
The rating of the Bonds is derived by applying a notching approach starting from the BBB-(NG) unsubordinated unsecured credit rating of the Issuer. Based on the estimated “Good Recovery Prospects”, of the authorised investments in an enforcement scenario, a rating uplift of one national scale notch has been deemed appropriate for this transaction.
The transaction mechanics entail the use of a maximum of 52% of the proceeds of the Issue for the growth of the Issuer’s loans and advances portfolio, and retail infrastructure enhancement, while the remainder (48%) are to be held in the Principal Repayment Account (“PRA”), to be invested in Federal Government of Nigeria Securities.
A legal opinion from the solicitor to the Trustees of Fortis Microfinance Bank Plc N10bn Bonds confirmed that the obligations of the Trustees under the Bonds’ Trust Deed constitute legal, valid, binding, and enforceable obligations under the provisions of Nigerian law.
Specifically, the legal opinion confirms that upon establishment of the PRA under the control of the Trustees, the Trustees will be empowered to exercise control over the PRA in accordance with the Trust Deed, and that in the event of failure by the issuer to perform its obligation under the Issue Documents, will be able to appropriate the Principal Reserve Amount, together with any interest thereon, in satisfaction of the obligations of the Issuer in accordance with the Trust Deed.
