Lagos, 31 January 2019 — Global Credit Ratings has accorded a final, public national scale long term rating of BBB-(NG) to Wema Funding SPV Plc’s N17.68bn Series 2 Bonds; with a Stable Outlook. The rating is valid until July 2019.
Global Credit Ratings (“GCR”) has accorded the above indicative credit rating based on the following key criteria:
Wema Bank Plc (“the Sponsor”) is a mid-sized bank in Nigeria by balance sheet size, with a relatively small 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 2 Bonds, which constitute senior obligations of the Issuer, to purchase (with up to 55% of the Offer proceeds) unsecured 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 (“PI”)). 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 Series 2 Bonds, upon maturity of the principal and if available, to purchase further PIs.
The rating of the Series 2 Bonds is supported by the estimated “Good Recovery Prospects” of the PIs in an enforcement scenario. This also takes cognisance that the investment income from the FGN Securities will be retained in the SPV (Issuer).
Ultimate honouring of the Series 1 Bond 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. 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
Initial/last rating (December 2018)^
Long term: BBB-(NG)
Primary Analyst Committee Chairperson
Julius Adekeye Dave King
+23 41 904-9462-3 firstname.lastname@example.org
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Global Structurally Enhanced Corporate Bonds Rating Criteria, updated September 2016
Wema Bank Plc’s rating reports, up to 2018
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; 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 rating was 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 rating above was disclosed to Wema Bank Plc with no contestation of/changes to the rating.
The information received from the Joint Issuing Houses and Wema Bank Plc to accord the credit rating included the Issuer’s 31 December 2017 audited annual financial statements, Sponsor’s 31 December 2017 audited annual financial statements (plus four years of comparative numbers), Sponsor’s 1H FY18 unaudited results, the Programme Trust Deed for the Debt Issuance Programme, the Programme Shelf Prospectus, the Series 2 Trust Deed, the Master Bonds Purchase Agreement, Deed of Undertaking, Vending Agreement between the Issuer and the Sponsor, Vending Agreement between the Issuer and the Purchaser, as well as the Series 2 Pricing Supplement.