Lagos Nigeria, 4 December 2018 — Global Credit Ratings has assigned a final public rating of ‘BBB+(NG)’ to both Union Bank of Nigeria Plc’s N7.2bn Series 1 Fixed Rate Bonds and N6.3bn Series 2 Fixed Rate Bonds, with the outlook accorded as Stable. The final bond ratings expire in June 2019.
Global Credit Ratings (“GCR”) has accorded the above final credit ratings to Union Bank of Nigeria Plc’s (the “Issuer”, “Union Bank”) Series 1 and Series 2 Fixed Rate Bonds based on the following key criteria:
The Issuer is a commercial bank in Nigeria, offering a portfolio of banking services to individual, SMEs, commercial and corporate clients. The ratings reflect the Issuer’s status as a mid-sized player within Nigerian banking sphere by balance sheet size, its improved capitalisation, strong shareholders’ support, and sustained profitability. GCR affirmed the Issuer’s long-term rating at ‘BBB+(NG)’ with a Stable outlook in July 2018.
The Programme Trust Deed features a negative pledge and other covenants to protect the interests of the bondholders.
In performing its analysis, GCR has considered those factors impacting the general creditworthiness of the Issuer. Being senior unsecured debt, the Series 1 and Series 2 Bonds bear the same probability of default as the Issuer and would reflect similar recovery prospects to senior unsecured creditors in the event of a default. As such, the rating accorded to each Series reflects the nature of the Series’ Bonds as senior unsecured obligations of the Issuer, ranking at least equally with all other senior unsecured indebtedness of the Issuer, present and future.
Given that the Bonds have no enhancement, timely payment of the obligations is dependent on the performance of the Issuer. Hence, the accorded ratings would be sensitive to subsequent rating actions on the Issuer.
The final rating accorded to the each Series relates to ultimate payment of principal and interest (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity).
NATIONAL SCALE RATINGS HISTORY
Initial/last rating (July 2018)
N7.2bn Series 1 Fixed Rate Bonds: BBB+(NG)
N6.3bn Series 2 Fixed Rate Bonds: BBB+(NG)
Rating outlook: Stable
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Banks and Other Financial Institutions, updated, March 2017.
Issuer rating reports (2015-18)
Glossary of Terms/Ratios (February 2018)
RATING LIMITATIONS AND DISCLAIMERS
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the final ratings expire in June 2019.
The Issuer participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The above credit ratings have been disclosed to the Issuer.
The information received from the Issuer and other reliable third parties to accord the credit ratings included: the latest audited financial statements as at 31 December 2017 (plus four years of comparative numbers), latest internal and/or external report to management, year-to-date unaudited accounts to 30 September 2018 and information specific to the rated entity and/or industry. Information relating to the Bond Issue include: Executed Shelf Prospectus; Executed Series 1 Pricing Supplement; Executed Series 2 Pricing Supplement; Executed Series 1 Trust Deed; and Executed Series 2 Trust Deed.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.