Announcements Financial Institutions Rating Alerts

GCR affirms Wema Funding SPV Plc’s Series 1 and Series 2 Bonds Rating of BBB-(NG); Outlook Stable

Lagos, 05 September 2019–Global Credit Ratings has affirmed the public national scale long term rating of BBB-(NG) accorded to Wema Funding SPV Plc’s Series 1 and Series 2 Bonds of N6.295bn and N17.68bn respectively, issued under Wema Funding SPV Plc N50bn Debt Issuance Programme; with a Stable Outlook. The rating is valid until July 2020.

SUMMARY RATING RATIONALE

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

Wema Bank Plc (“Wema” or “the bank” or “the Sponsor”) is a mid-sized bank in Nigeria by balance sheet size and geographic presence. The bank has a long-term national scale credit rating of BBB-(NG) accorded by GCR.

The transaction mechanics entails the use of the proceeds of the issuance of Wema Funding SPV Plc Series 1 and Series 2 Bonds, which constitute senior obligations of the Issuer, to purchase (with up to 55% of the Offer proceeds) senior subordinated bonds (“Wema Bank Bonds” or “Subordinated Bonds”) issued by the Sponsor. The remaining portion of the proceeds of the Issue (45%) are to be held in the Debt Service Payment Account (“DSPA”), to be invested in Federal Government of Nigeria (“FGN”) Securities (collectively, the Subordinated Bonds and FGN Securities are referred to as the Permitted Investments). All Subordinated Bonds’ debt servicing payments received from the Issue date are to be held in the DSPA and used to pay the coupon on the Bonds.

The ratings of the Bonds are derived by applying a notching approach starting from the senior subordinated debt credit rating of the Sponsor based on the proportion of the offer proceeds used for purchase of the Sponsor’s Subordinated Bonds, as well as the unsubordinated debt rating of the Issuer, in addition to the rating enhancement provided by the 45% of the Offer proceeds retained in the DSPA (invested strictly in risk free FGN Securities).

According to the Trustees performance reports on the Bonds, the Issuer has been meeting its obligations under the Bond Issues on a timely basis, with total coupon of N2.91bn and N1.45bn paid on Series 1 and Series 2 Bonds respectively from their respective allotment date up to 31 July 2019.

Ultimate honouring of the Bonds obligations depends on the performance of the Sponsor (and other parties in line with Transaction Documents). Thus, any rating upgrade of the Sponsor could be positive. However, a breach of the Master Bonds Purchase Agreement by the Sponsor, non-compliance with covenants, and a downgrade of the Sponsor’s rating, amongst others, could trigger a negative rating action.

NATIONAL SCALE RATINGS HISTORY

Series 1 Bonds
Initial rating – (December 2016)
Long term: BBB-(NG)
Rating outlook: Stable

Last rating (June 2018)
Long term: BBB-(NG)
Rating outlook: Stable

Series 2 Bonds
Initial/last rating – (December 2018)^
Long term: BBB-(NG)
Rating outlook: Stable

^Indicative rating

ANALYTICAL CONTACTS

Primary Analyst
Julius Adekeye
Senior Credit Analyst
adekeye@globalratings.net
+234 1 904 9462-3

Committee Chairperson
Dave King
king@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for rating Banks and Other Financial Institutions, updated May 2019
Global Structurally Enhanced Corporate Bonds Rating Criteria, updated November 2018
Sponsor’s rating report (2019)
Glossary of Terms/Ratios, February 2016

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; 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 a maximum of 12 months, or as indicated by the applicable credit rating document.

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

Wema Bank 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 Wema Bank Plc with no contestation of/changes to the ratings.

The information received from Wema Bank Plc to accord the credit ratings included the Issuer’s 31 December 2018 audited annual financial statements, Sponsor’s 31 December 2018 audited annual financial statements (plus four years of comparative numbers), Sponsor’s 1H FY19 unaudited results, the Programme Trust Deed for the Debt Issuance Programme, the Programme Shelf Prospectus, the Series 1 and Series 2 Trust Deeds, the Series 1 and series 2 Pricing Supplements, the Master Bonds Purchase Agreement, Deed of Undertaking, Vending Agreements between the Issuer and the Sponsor, Vending Agreements between the Issuer and the Purchaser, as well as the Trustees performance reports, up to 31 July 2019.

image_pdfPDF View


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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.