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GCR Assigns an Indicative Issue Rating of A-(NG)(IR) to Coronation MB Alternative Asset SPV Plc’s Proposed N15bn Series 1 Senior Secured Guaranteed Notes

Lagos, 14 October 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative issue rating of A-(NG)(IR) to Coronation MB Alternative Asset SPV Plc’s proposed N15bn Series 1 Senior Secured Guaranteed Notes, with a Stable Outlook.

Issue Rating class Rating scale Rating Outlook / Watch
Up to N15bn Series 1 Senior Secured Guaranteed Notes Long term Issue National A-(NG)(IR)* Stable Outlook

*IR stands for indicative rating.

Rating Rationale

Coronation MB Alternative Asset SPV Plc (“the Issuer”) is a special purpose vehicle incorporated as a business finance company solely for the purpose of raising finances through the securitization of loan receivables for the purposes as may be approved of by its board of directors (“the board”) from time to time. Specifically, the purpose of the N15bn Series 1 Senior Secured Guaranteed Notes is to finance purchase of loan receivables from Coronation Merchant Bank Limited (“Coronation MB” or “the Sponsor” or “the Guarantor”) through issuance of a securitized security to the general public.

The Issuer is in the process of filing an application with the Securities and Exchange Commission (“SEC”) to issue Notes into the Nigerian capital market under a N50bn Medium-Term Asset Backed Securitized Note Issuance Programme (“the Programme”). The Programme is backed by a resolution of the board of the Issuer, which authorises the Issuer to issue Notes in several separate Series or Tranches from time to time, with varying maturities and variable rates of interests. An initial N15bn is proposed to be issued in Series 1 Senior Secured Guaranteed Fixed Rate Notes under the Programme. The Series 1 Notes shall constitute senior, secured, unsubordinated, unconditional, and irrevocable obligations of the Issuer and shall at all times rank pari passu without preference with other obligations of the Issuer and the Guarantor.

The Guarantor, Coronation MB, has agreed to provide an irrevocable and unconditional guarantee in favour of the Guarantee Trustee for and on behalf of the Series 1 Noteholders to guarantee the timely performance of the obligations of the Issuer under the Series 1 Note Issue. In this regards, payment obligations of the Issuer in respect of the Notes, and that of the Guarantor under a Deed of Guarantee shall, save for such exceptions as may be provided by Applicable Law, at all times rank at least pari passu with all other senior unsecured indebtedness of the Issuer and the Guarantor, both present and future.

Accordingly, the Guarantor and the Guarantee Trustees are entering into a guarantee agreement pursuant to which Coronation MB, in its capacity as the Guarantor, shall guarantee the timely payment of all principal repayment and coupon payments regarding the Series 1 Notes, in line with the terms and conditions of the Deed of Guarantee. Legal opinion provided to GCR indicates that the Guarantee and other conditions stipulated in the transaction documents constitute legal, valid, binding and enforceable obligations of the Guarantor.

Coronation MB is assigned a national scale long term issuer rating of A-(NG) by GCR, with a Stable Outlook. The rating is underpinned by Coronation MB’s adequate funding and liquidity position, and sound asset quality metrics. Given that Coronation MB offers timely and full coverage of all payments due to the Noteholders under the Series 1 Notes through the Deed of Guarantee, the Notes bear the same default risk as Coronation MB and would reflect similar recovery prospects to senior unsecured creditors in the event of default. As such, the national scale long-term indicative issue rating of the Series 1 Notes is thus equalised with the Guarantor’s national scale long-term Issuer rating.

*The indicative rating assumes that the conditions in the Series 1 Senior Secured Guaranteed Notes’ transaction documents will not change and will receive regulatory approval. GCR expects to issue a final rating upon receiving all finalised and signed transaction documents in respect of the Series 1 Senior Secured Guaranteed Notes.

Outlook Statement

The stable outlook reflects the Guarantor’s national scale long term issuer rating.

Rating Triggers

Any changes in the national scale long term Issuer rating of the Guarantor and/or revision in the terms of the Guarantee would impact the rating of the Series 1 Senior Secured Guaranteed Notes.

Analytical Contacts

Primary analyst Yinka Adeoti Financial Institutions Analyst
Lagos, NG Adeoti@GCRratings.com +234 1 904 9462
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Nigeria Country Risk Scores, February 2021
GCR Nigeria Financial Institutions Sector Risk Score, February 2021

Ratings History

Coronation MB Alternative Asset SPV Plc

Rating class Review Rating scale Rating class Outlook Date
Long Term Issue Initial/Last National A-(NG)(IR) Stable October 2021

Glossary

Capital The sum of money that is invested to generate proceeds.
Cash Funds that can be readily spent or used to meet current obligations.
Coupon Interest payment on a security.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Default A default occurs when: 1.) The Borrower is unable to repay its debt obligations in full; 2.) A credit-loss event such as charge-off, specific provision or distressed restructuring involving the forgiveness or postponement of obligations; 3.) The borrower is past due more than X days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.
Exposure Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding. In insurance, it refers to an individual or company’s vulnerability to various risks
Guarantee An undertaking for performance of another’s obligations in event of default.
Income Money received, especially on a regular basis, for work or through investments.
Interest Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.
Issuer The party indebted or the person making repayments for its borrowings.
Leverage With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.
Long Term Rating See GCR Rating Scales, Symbols and Definitions.
Market An assessment of the property value, with the value being compared to similar properties in the area.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Rating Outlook A Rating Outlook indicates the potential direction of a rated entity’s rating over the medium term, typically one to two years. An outlook may be defined as: ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).
Repayment Payment made to honour obligations in regards to a credit agreement in the following credited order: 3.) Satisfy the due or unpaid interest charges; 4.) Satisfy the due or unpaid fees or charges; and 5.) To reduce the amount of the principal debt.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Securitisation Is a process of repackaging portfolios of cash-flow producing financial instruments into securities for sale to third parties.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
Senior A security that has a higher repayment priority than junior securities.
Short Term Current; ordinarily less than one year.
Transaction A transaction that enables an Issuer debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions.

Salient Points 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 ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to the Issuer and the Transaction Arrangers. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

The Issuer and the Transaction Arranger participated in the process via tele-conferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from the issuer and other reliable third parties to accord the indicative rating included:

  • Draft Shelf Prospectus,
  • Draft Programme Trust Deed,
  • Draft N15bn Series 1 Notes Trust Deed,
  • Draft Guarantor’s Deed of Guarantee,
  • Draft Series 1 Account Bank Agreement,
  • Legal opinion from the Solicitor to the Trustee,
  • Other related documents.
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