Announcements Financial Institutions Rating Alerts

GCR rates Forty Two Point Two’s MUR5bn Medium Term Secured and Unsecured Note Programme and subsequent issuances

Rating Action

Ebene, 20 May 2021 – GCR Ratings (“GCR”) has assigned a national scale long-term programme rating of AAA(MU) to the MUR5bn Medium Term Secured and Unsecured Note Programme (“MTNP”) issued by Forty Two Point Two.

Issue Rating class Rating scale Rating Outlook/Watch
Forty Two Point Two Medium Term Note Programme Long-Term Programme National AAA(MU) Stable

Furthermore, GCR has also assigned national scale long-term ratings to the following notes issued under Forty Two Point Two’s MTNP on the 29 April 2021:

Series Name Amount Rating Class Rating Scale Rating Outlook
FTPTA 0% 29/04/24 GBP21,000,000 Long-Term Issue National AAA(MU) Stable
FTPTA 0% 29/04/26 GBP9,000,000 Long-Term Issue National AAA(MU) Stable
FTPT 2.5% 29/04/24 GBP21,000,000 Long-Term Issue National AAA(MU) Stable
FTPT 2.7% 29/04/24 MUR500,000,000 Long-Term Issue National AAA(MU) Stable
FTPT 3.2% 29/04/26 MUR1,100,000,000 Long-Term Issue National AAA(MU) Stable
FTPT 3.55% 29/04/28 MUR200,000,000 Long-Term Issue National AAA(MU) Stable

Transaction Summary

Forty Two Point Two issued GBP51m and MUR1.8bn of Notes under its MTNP on 29 April 2021. The proceeds are to be used for the repayment of existing debt facilities and planned purchase of additional shares in the dual listed asset manager, Ninety One (please see the link below to the Forty two Point Two rating announcement for more details on Ninety One).

The Notes have the following key features:

  • All of the above mentioned notes are secured against shares in the listed asset manager;
  • The interest payment frequency is bi-annual, whilst the maturity profile is straight, depending on the various maturity dates;
  • The Issuer is required to maintain 12 months of interest payments in an escrow account; and
  • The Issuer shall ensure that at least 20% of the final redemption amount be maintained in an escrow account should the Notes be maturing within the following 12 months.

The following key financial covenants are applicable:

  • Interest Cover Ratio (“ICR”) of at least 2.5x;
  • Cash Flow Coverage Ratio (“CCR”) of at least 1.1x; and
  • Share Coverage Ratio (“SCR”) no less than 2.0x.

Please refer to the listing particulars and/or the applicable pricing supplements for further information on the financial covenants.

Rating Rationale

The Issue constitutes direct and unsubordinated obligations of the Issuer and rank pari-passu among themselves and (save for certain debt preferred by law) equally with all other obligations (other than subordinated obligations (if any)) of the Issuer outstanding from time to time. The Issue rating therefore aligns with the rating accorded to the Issuer, which balances Forty Two Point Two’s net ungeared position, strong liquidity, and high quality of underlying assets with high investment concentration, related party exposures and limited franchise strength.

In this regard, GCR assigned Mauritian national scale long and short-term issuer ratings to Mauritius based Forty Two Point Two of AAA(MU)/A1+(MU), respectively, both with a Stable Outlook. The full announcement can be viewed at https://gcrratings.com/announcements/gcr-assigns-forty-two-point-two-bbb-a2-aaamu-a1mu-and-aaaza-a1za-long-term-and-short-term-international-and-national-scale-ratings-respectively-outlook-stable/.

Given the alignment of the Issue ratings to that of the Issuer, changes to the Issuer ratings have a direct impact on the Issue ratings. As such, the outlook statement and rating triggers that follow relate to the Issuer ratings.

Outlook Statement

Given the regional diversification of the revenue source, net ungeared balance sheet and good track record of income stability, it is our view that Forty Two Point Two can sustain its current credit profile over the next 12-18 months, underpinning the stable outlook. While there are plans to slightly raise debt levels in the short term, serviceability is still expected to remain manageable with ample headroom provided by strong earnings, as well as the quantum and liquidity of the investment portfolio, even under a conservatively stressed scenario.

Rating Triggers

The national scale ratings are at the ceiling. On the other hand, should there be a material drop in earnings, or severe deterioration in the market value of investments leading to higher levels of leverage, downward rating action could occur. In addition to this, negative ratings pressure could stem from Ninety One experiencing significant loss of Assets Under Management, lower than expected earnings or if sources vs uses coverage drops below 1x.

Analytical Contacts

Primary analyst Vinay Nagar Senior Financial Institutions Analyst
Johannesburg, ZA Vinay@GCRratings.com +27 11 784 1771
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +27 11 784 1771
Registered Mauritius Office
Level 6, GFin Tower, 42 Hotel Street, Cybercity, Ebene, Mauritius, 72201

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Investment Holding Companies, May 2019
Criteria for Rating Asset Managers, November 2019 * appendix to the Criteria for Financial Services
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Country Risk Scores, March 2021
GCR Financial Institutions Sector Risk Scores, February 2021
Forty Two Point Two rating announcement, April 2021

Ratings History

Forty Two Point Two MUR5bn Medium Term Secured and Unsecured Note Programme and subsequent issuances

Issue / Series name Rating class Review Rating scale Rating Outlook Date
Forty Two Point Two Medium Term Note Programme Long Term Programme Initial/last National AAA(MU) Stable May 2021
FTPTA 0% 29/04/24 Long Term Issue Initial/last National AAA(MU) Stable May 2021
FTPTA 0% 29/04/26 Long Term Issue Initial/last National AAA(MU) Stable May 2021
FTPT 2.5% 29/04/24 Long Term Issue Initial/last National AAA(MU) Stable May 2021
FTPT 2.7% 29/04/24 Long Term Issue Initial/last National AAA(MU) Stable May 2021
FTPT 3.2% 29/04/26 Long Term Issue Initial/last National AAA(MU) Stable May 2021
FTPT 3.55% 29/04/28 Long Term Issue Initial/last National AAA(MU) Stable May 2021

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S GLOSSARY

Collateral Asset provided to a creditor as security for a loan or performance.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
Credit Risk The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and interest when due.
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.
DMTN Domestic Medium-Term Note.
Issuer Ratings See GCR Rating Scales, Symbols and Definitions.
Issuer The party indebted or the person making repayments for its borrowings.
Lease Conveyance of land, buildings, equipment or other assets from one person (lessor) to another (lessee) for a specific period of time for monetary or other consideration, usually in the form of rent.
Leverage With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.
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.
Loan To Value Principal balance of a loan divided by the value of the property that it funds. LTVs can be computed as the loan balance to most recent property market value, or relative to the original property market value.
Long Term Rating See GCR Rating Scales, Symbols and Definitions.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Portfolio A collection of investments held by an individual investor or financial institution. They may include stocks, bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value.
Proceeds Funds from issuance of debt securities or sale of assets.
Property Movable or immovable asset.
Rating Horizon The rating outlook period
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Refinancing The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.

For a detailed glossary of terms utilised in this announcement please click here.

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 ratings have been disclosed to Forty Two Point Two. The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.

Forty Two Point Two participated in the rating process via written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information used to analyse and accord the credit ratings included:

  • Audited financial results as at 31 March 2020 (and four years of comparative numbers);
  • Unaudited financial results as at 31 March 2021;
  • Budgets for 2021 and 2022;
  • Final, signed programme memorandum;
  • Applicable pricing supplements for all Notes issued; and
  • Other public and private information;
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