GCR Assigns Indicative Rating Of AAA(NG To Nigeria Mortgage Refinance Company Plc’s Series 2 Bonds
Global Credit Ratings has accorded an indicative, national scale long-term credit rating of AAA(NG) to Nigeria Mortgage Refinance Company Plc’s Series 2 (N11bn) Bonds; with the outlook accorded as Stable. The rating is valid until August 2018.
The Series 2 Notes are being issued under Nigeria Mortgage Refinance Company Plc’s (“NMRC”, “the Issuer” or “the company”) N440bn Debt Issuance Programme (“DIP”) or N140bn DIP, as amended. The DIP is backed by a resolution of NMRC’s Board of Directors (“Board”), which authorises the Issuer to issue the Notes in series, different forms, and under different terms and conditions as may be deemed fit by the Board. Accordingly, the Series 1 Notes under the DIP were issued on 29 July 2015. Like the Series 1 Notes, the Series 2 Notes (pay-through fixed rate notes) constitute direct, senior secured, unconditional and unsubordinated obligations of the Issuer, ranking pari-passu, without any preference among themselves.
The Series 2 Notes are backed by FGN guarantee. FGN unconditionally and irrevocably guarantees to the Trustees for the benefit of the Noteholders, by way of revolving and continuing guarantee, the due and punctual observance and performance by the Issuer of all its payment obligations in respect of all and any sums (including the principal and interest) due and payable by the Issuer under the Series 2 Notes. In addition, all payment obligations under the Issue (except otherwise provided for by applicable laws) rank at least equal with all other present or future secured or unsubordinated payment obligations of both the Issuer and the Guarantor.
Note must be taken of the fact that the rating accorded to the Series 2 Notes relates to timely payment of interest and principal. The rating excludes an assessment of the Issuer’s ability to pay any (early repayment) penalties.
RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above indicative# credit rating based on the following key criteria:
The Issuer has been on track in the execution of its maiden five-year strategic plan, with notable progress evident in the area of market development (particularly, the development and implementation of generally accepted uniform underwriting standards (“UUS”) to benefit potential borrowers and enable them to purchase homes from developers at affordable prices). However, the pace of advancement in mortgage re-financing activities was initially constrained by the dearth of eligible mortgages. So far, NMRC has been meeting its obligations under the initial Issue (Series 1 Notes) on timeous basis, with no recourse to the FGN Guarantee
.
GCR has accorded the Series 2, which are unconditionally and irrevocably guaranteed by FGN, a long-term national scale rating of AAA(NG), as the rating of the Notes is credit linked to the rating of the FGN in its capacity as Guarantor. The rating accorded to the Notes is solely dependent on the validity of the FGN Guarantee and the ability of the FGN to pay all sums of money the Issuer may have failed to pay, when due, in accordance with the Series 2 Notes’ Trust Deed.
GCR received a legal opinion from the solicitor to the Bond Trustees (G. Elias & Co. (Solicitors and Advocates)), dated 13 May 2015, stating that the FGN Guarantee represents the legal, valid and binding obligations of the Guarantor and is enforceable against it in accordance with the terms of the Guarantee. GCR relied on this legal opinion to accord the rating to the Series 2 Notes. However, it should be noted that the legal opinion has not been reviewed by another external legal counsel. The rating accorded should not be viewed as a replacement of the legal advice that investors should seek on the validity and enforceability of the Transaction Documents and the FGN Guarantee.
Should the rating of the Guarantor change, the rating of the Series 2 Notes may also change, but not necessarily in the same quantum.
* Indicative rating and outlook, to be converted to a final rating and outlook upon the receipt of all final transaction documents
