GCR Assigns Final Rating to FCMB’s Additional Tier 1 Bonds
GCR Ratings (GCR) has assigned a final public national scale long-term Issue rating of BBB-(NG) to FCMB Group Plc.’s N20.7 billion additional tier 1 subordinated bonds, with the outlook accorded as Stable.
The rating agency said in a statement on Tuesday, noting that the Series 1 perpetual, non-cumulative, fixed-rate, resettable, additional tier 1 (AT1) subordinated Bond is the first to be issued under FCMB Group Plc.’s under its N300 billion Debt Issuance Programme.
It said the stable outlook reflects that of the bank’s national scale ratings and adequate room over deferability or write-down clauses.
MarketForces Africa reported that FCMB Group raised N20.7 billion through the Series 1 Bonds, at a resettable fixed coupon rate of 16%, with no scheduled maturity date.
The group was in the local debt market twice in the first quarter of 2023 and raised more than N50 billion to support its capital structure.
The Series 1 Bonds qualify as AT1 capital of the Issuer under the approval of the regulator, Central Bank of Nigeria (CBN) and will constitute direct, unsecured, and subordinated obligations of the Issuer.
GCR stated that the Series 1 Bonds ranks pari passu among themselves and with any present and future parity obligations.
The net proceeds from the Series 1 Bonds will be exclusively utilised for the provision of qualifying AT1 capital to First City Monument Bank Limited.
The Series 1 Bonds’ structure is solidified through an intercompany notes agreement, the terms and conditions of which mean that the bank (the major operating entity of the Group) is contractually obliged to support the Group’s notes in line with the bank’s (currently theoretical) AT1 ranking.
The notes, therefore, rank alongside such parity obligations of the bank, the statement reads.
As a result, GCR said it has chosen to notch down from the bank’s A-(NG) long-term issuer rating, and not the Group’s BBB+ (NG) long-term issuer rating.
Furthermore, GCR said it applies a 3-notch differential from the senior unsecured ratings of the bank.
“This reflects the contractual subordination of the notes – they rank below senior unsecured and subordinated (tier two qualifying capital) bonds, interest payments are deferrable and non-cumulative, subject to the Issuer’s discretion”.
The rating firm added that the fact that the Series 1 Bonds can be written down when the Issuer’s core equity tier 1 (CET1) ratio reaches 10.75% (0.25% above the regulatory minimum) or when the Central Bank of Nigeria (CBN) considers the Issuer to be at a point of non-viability.
As a result, GCR has assigned a final public national scale long-term Issue rating of BBB-(NG) to the Series 1 Bonds, saying the notes qualify for intermediary levels of capital under its methodology. # GCR Assigns Final Rating to FCMB’s Additional Tier 1 Bonds
