Announcements Financial Institutions Rating Alerts

GCR Assigns National Scale Long and Short-term Issuer Ratings of B+(NG) / B(NG) to Marathon Asset and Fund Management Limited, Outlook Stable

Lagos, 20 October 2021 – GCR Ratings (“GCR”) has assigned Marathon Asset and Fund Management Limited’s national scale long-term and short-term issuer ratings of B+(NG) and B(NG) respectively, with a Stable Outlook.

Rated Entity / Issue Rating class Rating scale Rating Outlook / Watch
Marathon Asset and Fund Management Limited Long Term Issuer National B+(NG) Stable Outlook
Short Term Issuer National B(NG)

Rating Rationale

The ratings assigned to Marathon Asset and Fund Management Limited (“MAFM” or “the Company”) reflect its strong liquidity profile and moderate risk exposures over its two years of operations. However, these strengths are offset by its low competitive position as a start-up and the substantial level of related party exposures on the balance sheet.

MAFM is start-up asset management company, which commenced operation in the final quarter of 2018. Current operation is largely of private wealth management to high net-worth individual (“HNIs”) and issuance of product-based advances to small and medium scale enterprises and HNIs. Total assets (including funds under management) stood at c.N3bn as at unaudited August 2021 from N1.5bn at FY19. The company’s competitive position score is low, constrained by its relatively short-track record, small sized-status of asset under management (“AUM”), as well as limitation in product and business lines diversifications. As such, revenue streams are somewhat limited presently. While we expect the company to gain more traction as the business progresses, this is likely to evolve over the medium to long-term.

The board size and structure appear satisfactory for the business model and size of operation. However, management and governance is assigned a moderate score to reflect the related party exposures on both the funding and risk profiles.

Leverage exposures is considered intermediate, with GCR’s calculated leverage ratio ranging between 15-19% historically and stood at 11% as at end-August 2021. We expect this metric to moderate further as liability acceptances increases. However, should the company successfully evolve to full-fledged asset management operation, in which liability acceptances are no longer considered as borrowings, leverage position is likely to become positive, and supportive of the rating.

Overall risk exposure is considered moderate, underpinned by the fact that a substantial portion of MAFM’s assets are in risk-free Federal Government of Nigeria (“FGN”) securities. While the company is exposed to credit risk through its loan exposures (‘Mat structured assets’), the exposure level is considered moderate at 33% and subsequently 10% of the asset pool at FY20 and end-August 2021respectively. Going forward, we expect credit risk exposures to remain moderate, albeit the company displayed a significant concentration by obligors at FY20 due to the limited operational scale.

Funding and liquidity is considered in support of the rating. MAFM’s funding base comprises largely investment products targeted at high net-worth individuals, with maturities ranging between 30-365 days and can be rolled over at maturity. However, a high degree of concentration is noted in the sources of this funds, as the single largest investor accounted for about 40% of the funding base as at FY20.

Liquidity risk is considered minimal, given that MAFM’s assets are largely held in cash and risk-free tradeable instruments. Also, an analysis of the inflow and outflow of funds reflects a good coverage of 1.1x at FY20 and 1.6x at August 2021.

Outlook Statement

The stable outlook reflects our expectation that MAFM will continue to improve its market position, grow the AUM, and that the balance sheet will remain ungeared, while earnings will remain at modest level with minimal risk exposures over at least the next 12-18 months.

Rating Triggers

The ratings of MAFM may be reviewed upward following a significant and sustained improvement in earnings and competitive positioning. Also, reduction in related party exposures or sizeable increase in total portfolio size which results in it accounting for lower portion of the company’s operations. However, the introduction of interest-bearing loans may result in significantly higher leverage ratio and negatively impact the ratings.

Analytical Contacts

Primary analyst Funmilayo Abdulrahman Senior Analyst, Financial Institutions
Lagos, NG Funmilayo@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 Country Risk Scores, February 2021
GCR Financial Institutions Sector Risk Score, February 2021

Risk Score Summary

Rating Components & Factors Risk scores
Operating environment 5.75
Country risk score 3.75
Sector risk score 2.00
Business profile -4.25
Competitive position -4.00
Management and governance -0.25
Financial profile 2.00
Capital and leverage 0.50
Risk 0.50
Funding and liquidity 1.00
Comparative profile 0.00
Group support 0.00
Peer analysis 0.00
Total Score 3.50

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.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
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.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the ratings were 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 Marathon Asset and Fund Management Limited. 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.

Marathon Asset and Fund Management Limited participated in the rating process via telephonic management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Marathon Asset and Fund Management Limited and other reliable third parties to accord the credit ratings included:

  • Audited financial results as at 31 December 2020;
  • Unaudited financial results as at 31 August 2021 and
  • Other publicly available information.


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 © 2022 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.