Announcements Financial Institutions Rating Alerts

GCR Affirms Nigeria Mortgage Refinance Company Plc’s Bonds Rating of AAA(NG); Outlook Stable.

Lagos, 16 November 2018–Global Credit Ratings has affirmed the national scale long-term credit rating of AAA(NG) accorded to Nigeria Mortgage Refinance Company Plc’s Series 1 (N7.53bn) and Series 2 (N11.0bn) Bonds; with the outlook accorded as Stable. The rating is valid until September 2019.

Transaction summary

The Series 1 and Series 2 Notes (“the Notes” or “the Issues”) were issued under Nigeria Mortgage Refinance Company Plc’s (“NMRC” or “the Issuer”) N140bn Medium Term Notes Programme (“MTNP”) (as amended). An aggregate sum of N19bn has been raised under the MTNP, with an aggregate sum of N8bn raised through the issuance of Series 1 Notes in November 2015 and N11bn raised through the issuance of Series 2 Notes in May 2018.The MTNP is backed by a resolution of NMRC’s Board of Directors (“the Board”), which authorises the Issuer to issue the Notes in series, different forms, and under different terms and conditions as may be deemed fit by the Board. The Series 1 and Series 2 Notes (pay-through fixed rate notes) constitute direct, senior secured, unconditional and unsubordinated obligations of the Issuer, ranking pari-passu, without any preference among themselves.

The Series 1 and Series 2 Notes are backed by Federal Government of Nigeria (“FGN”) guarantee. FGN unconditionally and irrevocably guarantees to the Trustees for the benefit of the Noteholders, by way of revolving and continuing guarantee, the due and punctual observance and performance by the Issuer of all its payment obligations in respect of all and any sums (including the principal and interest) due and payable by the Issuer under the Issues. In addition, all payment obligations under the Issue (except otherwise provided for by applicable laws) rank at least equal with all other present or future secured or unsubordinated payment obligations of both the Issuer and the Guarantor.

Note must be taken of the fact that the ratings accorded to the Series 1 and Series 2 Notes relate to timely payment of interest and principal. The ratings exclude an assessment of the Issuer’s ability to pay any (early repayment) penalties.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above indicative credit rating based on the following key criteria:

The Issuer has been on track in the execution of its maiden five-year strategic plan, with notable progress evident in the area of The Issuer is a private sector entity with a public purpose. Accordingly, government support for NMRC is implied, this corroborated by the demonstrated willingness of FGN to provide a full guarantee on the company’s debt issues during its initial operational stage. Currently, NMRC’s ownership base comprises two public sector related entities (jointly owning 36.6% equity stake), while the remainder are diversely owned by local financial institutions (banks and non-bank financial institutions).

GCR has accorded the NMRC Notes, which is unconditionally and irrevocably guaranteed by FGN, a long-term national scale rating of AAA(NG), as the rating of the Notes is credit linked to the rating of the FGN in its capacity as Guarantor. The ratings accorded to the Notes are solely dependent on the validity of the FGN Guarantee and the ability of the FGN to pay all sums of money the Issuer may have failed to pay, when due, in accordance with the Series 1 and Series 2 Notes’ Trust Deeds.

To date, the Issuer has been fulfilling its obligations under the Issues on a timeous basis, with no recourse to the FGN Guarantee.

Should the rating of the Guarantor change, the rating of the Series 1 Notes may also change, but not necessarily in the same quantum.

NATIONAL SCALE RATINGS HISTORY

Series 1 Notes
Initial rating^ (November 2015)
Long term: AAA(NG)
Outlook: Stable

Last rating (August 2016)
Long term: AAA(NG)
Outlook: Stable

Series 2 Notes
Initial/last rating^ (November 2018)
Long term: AAA(NG)
Outlook: Stable

^Final rating.

ANALYTICAL CONTACTS

Primary Analyst Committee Chairperson
Julius Adekeye Dave King
+23 41 462 2545 king@globalratings.net
adekeye@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Global Credit Linked Note and Repackaging Vehicle Rating Criteria, updated May 2017
Glossary of Terms/Ratios (February 2016)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://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, Nigeria Mortgage Refinance Company Plc, and therefore, GCR has been compensated for the provision of the ratings.

Nigeria Mortgage Refinance Company Plc 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 Nigeria Mortgage Refinance Company Plc with no contestation of/changes to the ratings.

The information received from Nigeria Mortgage Refinance Company Plc to accord the credit ratings included the Issuer’s Certificate of Incorporation, Memorandum and Articles of Association, draft risk management policy, draft code of corporate governance and related committee terms, and the audited accounts of the Issuer for 2017, the Trust Deed for the Debt Issuance Programme, the Base Shelf Prospectus, the Series 1 and Series 2 Notes Trust Deeds, the Series 1 and Series 2 Notes Supplemental Shelf Prospectus, the Security Trust Deed, the Deed of Guarantee, the Vending Agreements, the Master Purchase, Refinance and Servicing Agreement, the Account Bank/ Paying Agent Agreement, and the Joint Trustees’ performance reports on the Series 1 Notes (up to August 2018). In addition, other information specific to the rated entity and/or industry was also received.

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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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