FSDH SPV Bonds Rating Upgraded to BBB, Outlook Stable
GCR Ratings has upgraded the national scale long-term issue rating of FSDH Funding SPV Plc.’s Series 1 Tranche A Bonds to BBB+ (NG) and affirmed the A-(NG) national scale long-term issue rating assigned to the Series 1 Tranche B Bonds, with a Stable Outlook.
The emerging market-focused rating firm said in a statement on Friday, noting that the Series 1 Tranche A and Tranche B Bonds were issued in February 2021 under FSDH Funding special purpose vehicle (SPV) Plc.’s N30 billion Debt Issuance Programme.
GCR explains that the Issuer was established by FSDH Merchant Bank Limited for the purpose of raising funds for the Sponsor –FSDH.
It noted that the enabling resolution of the Issuer’s Board of Directors permits the directors 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.
“The Series 1 Tranche A Bonds constitute direct, unsecured and subordinated obligations of the Issuer, ranking pari passu without any preference among themselves”.
On the other hand, the Series 1 Tranche B Bonds are senior unsecured obligations of the Issuer, and rank pari passu among themselves and equally with all other existing and future unsecured, unsubordinated obligations of the Issuer, the rating report stated.
It added that the proceeds of the Bonds were used to expand the Sponsor’s credit risk asset base.
“While the Issuer is FSDH Funding 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 FSDH’s credit standing and financial position. FSDH has been accorded a long-term national scale credit rating of A-(NG) with a Stable Outlook in October 2021”, GCR said.
Also, it noted that the upgrade of the Series 1 Tranche A Bonds to BBB+(NG) is driven by a change in GCR Criteria, which stipulates one notch down rating for senior subordinated notes.
The Series 1 Tranche B Bonds rating has been affirmed at A-(NG), as GCR considers the bonds to rank at par with the sponsor’s long-term Issuer credit rating.
According to the periodic performance reports provided to GCR by the Trustees to the bondholders, dated September 8, 2021, the Issuer has been meeting all its obligations on a timely basis on the Bonds.
However, the stable outlook, according to GCR Ratings, reflects an opinion that the financial profile of the sponsor will remain stable over the next 12-18 months.
“While the risk-weighted asset is expected to increase significantly due to high loan book growth, we expect FSDH’s capitalisation to remain firm within the high band over the rating horizon. Also, credit losses are expected to moderate with minimal adverse credit migration”, the rating agency said.
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