Lagos Nigeria, 10 September 2018 — Global Credit Ratings has assigned an indicative public rating of ‘BBB+(NG)’ to both Union Bank of Nigeria Plc’s proposed N7.2bn Series 1 Fixed Rate Bonds and N6.3bn Series 2 Fixed Rate Bonds, with the outlook accorded as Stable. The indicative bond ratings expire in December 2018.
Global Credit Ratings (“GCR”) has accorded the above credit ratings to Union Bank of Nigeria Plc’s (the “Issuer”, “Union Bank”) proposed 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 Issuer has filed an application with Securities and Exchange Commission to issue bonds in the Nigerian capital market, under a N100bn Debt Issuance Programme (“DIP”). Under the DIP, bonds shall be issued in Series, with an initial Issuance of N13.5bn expected to be raised in two Series; Series 1 and Series 2. While Series 1 Bonds shall have a maturity tenor of three (3) years, Series 2 Bonds shall be seven (7) years. The principal amount on each Series shall be repaid in full on the relevant Maturity Date. Interest shall be payable semi-annually in arrears, in equal payments, up to and including the Maturity Date. The Series 1 and Series 2 Bonds shall constitute direct, unconditional, unsecured and senior obligations of the Issuer.
The Programme Trust Deed features a negative pledge and other covenants to protect the interests of the bondholders. As at 7 September 2018, there were no covenant breaches.
The indicative, public, national scale long term credit 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. The ratings relate to ultimate payment of principal and interest.
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 ratings will be accorded upon receipt of satisfactorily signed and executed final transaction documents.
NATIONAL SCALE RATINGS HISTORY
Initial/new rating (July 2018)
N7.2bn Series 1 Fixed Rate Bonds: BBB+(NG)
N6.3bn Series 2 Fixed Rate Bonds: BBB+(NG)
Rating outlook: Stable
Last rating: n/a
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 indicative ratings expire in December 2018.
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 31 March 2018 and information specific to the rated entity and/or industry. Information relating to the proposed Bond Issue include: Draft Shelf Prospectus; Draft Series 1 Pricing Supplement; Draft Series 2 Pricing Supplement; Draft Series 1 Trust Deed; and Draft 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.