Announcements Financial Institutions Rating Alerts

GCR Accords FSDH Funding SPV Plc Series 1 (Tranche A and Tranche B) Bonds Indicative Ratings

Lagos Nigeria, 15 January 2021–Global Credit Ratings has accorded an indicative rating of BBB(NG) and A-(NG) to FSDH Funding SPV PLC’s Series 1 Tranche A and Tranche B Bonds respectively, under the N30bn Debt Issuance Programme; with the outlook accorded as Stable. The rating is valid until June 2021.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above indicative rating to FSDH Funding SPV PLC’s Series 1 (Tranche A and Tranche B) Bonds (“the Series 1 Bonds), under the N30bn Debt Issuance Programme (“DIP”), based on the following key criteria:

FSDH Funding SPV PLC (“the Issuer”) was incorporated in June 2013 as a special purpose vehicle to issue Bonds and/or Structured Notes, with the proceeds to be on-lent to FSDH Merchant Bank Limited (“FSDHMB” or “the Sponsor”). Accordingly, the Series 1 (Tranche A and Tranche B) Bonds are being issued under the Issuer’s N30bn Debt Issuance Program (“DIP”), pursuant to a resolution of its board of directors, towards the purchase of notes (“FMB Notes”) to be issued on similar terms by the Sponsor. The Series 1 (Tranche A) Bonds will constitute unconditional, unsecured, subordinated obligations of the Issuer, while the Series 1 (Tranche B) Bonds will constitute unconditional, unsecured, senior obligations of the Issuer. The Issuer intends to raise an aggregate sum of up to N20bn through both Tranche A and Tranche B Bonds.

The indicative ratings accorded to the Series 1 (Tranche A and Tranche B) Bonds relate to the timely payment of principal and interest. The ratings exclude an assessment of the Issuer’s ability to pay any (early repayment) penalties.

The Series 1 Bonds is to be issued with recourse to FSDHMB as the final recipient/ beneficiary of the funds raised, hence the credit profile of FSDMB, underpinned by its competitive position, asset quality and earning profile is a key rating consideration. Global Credit Rating Company Limited (“GCR”) affirmed the long-term national scale rating of FSDHMB as A-(NG) in September 2020, and the outlook accorded as Stable.

In accordance with the Deed of Undertaking, FSDHMB pledge to unconditionally and irrevocably guarantee to make all payments payable by the Issuer in respect of the Bonds, which shall be fully discharged through payment of the appropriate amount in connection with the Notes.

A legal opinion from the solicitor to the Trustee (George Ikoli & Okagbue) confirms that the transaction documents and undertaking provided by FSDHMB is valid and enforceable under the Nigerian Law.

Given the subordinated and unsecured nature of the Tranche A Bonds, the Bonds were accorded an indicative national scale rating of BBB(NG), while the Tranche B Bonds, being senior, and unsecured notes will rank at par with all senior unsecured indebtedness and the claims of depositors of the Bank. Consequently, the Tranche B Bonds have been accorded an indicative, public national scale long-term rating of A-(NG), in line with the Sponsor’s rating.

Given that the ability of the Issuer to meet its obligations under this Issue is dependent on the financial condition of the Sponsor, the accorded rating would be sensitive to a positive rating action on the Sponsor. However, a breach of the Master Note Issuance Agreement, non-compliance with covenants, and/or a downgrade of the Sponsor’s rating, may result in a negative rating action.

NATIONAL SCALE RATINGS HISTORY

Initial/last rating (December 2020)*

Series 1 Tranche A: BBB(NG)

Series 1 Tranche B: A-(NG)

Outlook: Stable

*indicative rating

ANALYTICAL CONTACTS

Primary Analyst

Funmilayo Abdulrahman

Senior Credit Analyst

funmilayo@gcrratings.com

+234 1 904 9462-3

Committee Chairperson

Dave King

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Banks and Other Financial Institutions, updated March 2017

Glossary of Terms/Ratios, February 2016

FSDH MB’s report (2020)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATINGS-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT www.globalratings.com.ng

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 validity of the rating is for 12 months, or as indicated by the applicable credit rating document.

The ratings were solicited by, or on behalf of, FSDH Funding SPV Plc, and therefore, GCR has been compensated for the provision of the ratings.

FSDH Merchant Bank Limited 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 credit ratings above were disclosed to FSDH Merchant Bank Limited with no contestation of/changes to the ratings.

The information received from FSDH Funding SPV Plc and FSDH Merchant Bank Limited to accord the credit rating included the Sponsor’s 31 December 2019 audited annual financial statements (plus three year of comparative numbers), unaudited accounts to June 2020, Draft Trust Deed for the Debt Issuance Programme, the Programme Shelf Prospectus, the Series 1 (Tranche A and Tranche B) Trust Deeds, the Series 1 Supplemental Shelf Prospectus, the Master Notes Issuance Agreement, Draft Pricing Supplements for the Series 1 (Tranche A and Tranche B) Bonds, Deed of Undertaking, Vending Agreement and Legal Opinion from the Solicitor to the Trustee (George Ikoli & Okagbue).

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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