Moody’s Places Bidvest on Review for Downgrade over Access Bank Deal
Moody’s Ratings has placed on review for downgrade the ratings of Bidvest Bank Limited amidst acquisition deal by its parent company with Access Bank Plc, a Nigerian lender with lesser capacity.
In the rating note, Moody’s said it is set to downgrade Bidvest Ba2 domestic-currency long-term issuer rating, the Aa2.za national scale domestic-currency long-term issuer rating, the P-1.za national scale short-term issuer rating, the ba3 Adjusted Baseline Credit Assessment and the b2 BCA.
At the same time, analysts said they have affirmed the Not Prime domestic-currency short-term issuer rating of Bidvest Bank. Previously, the outlook on the long-term issuer rating was developing.
The rating action follows the announcement by The Bidvest Group Limited that it has entered into an agreement to dispose of its 100% stake in Bidvest Bank Holdings Limited to Access Bank Plc.
The review for downgrade on the domestic-currency long-term issuer rating and the Adjusted BCA of Bidvest Bank will primarily focus on assessing the progress in the acquisition process and the likelihood of the acquisition being completed.
Moody’s said a successful completion of the acquisition by Access Bank could lead to a multi-notch downgrade of Bidvest Bank’s issuer rating due to the loss of two of the notches of parental support uplift from Bidvest Group.
This is because the potential new shareholder, Access Bank, has both lower capacity than Bidvest Group to support the bank and lower ratings than Bidvest Bank itself.
At present the Ba2 domestic-currency long-term issuer rating of Bidvest Bank benefits from two notches of uplift from the bank’s b2 BCA, reflecting Moody’s expectation of a high probability of affiliate support from Bidvest Group in case of need.
“Despite the impending divestment and the signature of a binding sale agreement, our expectation is that Bidvest Group will safeguard the bank’s financial health and operational stability”.
Moody’s said the review will also take into account the evolution liability structure of Bidvest Bank following the acquisition, and the potential implications for Advanced LGF analysis.
Bidvest Bank is domiciled in South Africa and is subject to the Financial Services Laws Amendment Act (FSLAA), which analysts consider an operational resolution regime.
The review for downgrade on the bank’s standalone BCA will focus on the uncertainties regarding the future strategic direction of the bank post-disposal, the potential disruption to its activities during the disposal process as well as the bank’s post-acquisition financial fundamentals, which will depend on how it is combined with Access Bank’s existing South African operations.
According to Moody’s, the review will also assess whether the current positioning of Bidvest Bank’s b2 standalone BCA two notches above Access Bank’s caa1 standalone BCA would remain appropriate in case of successful completion of the acquisition.#Moody’s Places Bidvest on Review for Downgrade over Access Bank Deal#
