Rating Release

Agusto & Co. hereby affirms the “Bbb-” rating assigned to LAPO MFB SPV Plc’s Series II ₦6.2 billion Bond

The rating expires on 31 March 2023.

Agusto & Co. hereby affirms the “Bbb-” rating assigned to LAPO MFB SPV Plc’s (“LAPO SPV” or “the Issuer”) Series II ₦6.2 billion 5-Year 13% Fixed Rate Senior Unsecured Bond (“the Bond” or “the Issue”). The Bond’s coupon is payable semiannually and the principal will be redeemed as a bullet sum at maturity in March 2025. The Issuer was established to finance LAPO Microfinance Bank Limited (“LAPO MFB” or “the Sponsor”) by issuing debt securities to the general public. The Issue is backed by LAPO MFB’s undertaking to fulfil LAPO SPV’s payment obligations to the bondholders. The Bond rating mirrors the standalone rating of the Sponsor and as of 31 December 2022, LAPO MFB had made five coupon payments totalling ₦2.07 billion to bondholders, in line with the Issue’s terms.

The rating reflects the Sponsor’s leading position in the microfinance industry, good liquidity and funding profile upheld by its wide branch network and retail affinity, low leverage and experienced management team. However, the rating is constrained by LAPO MFB’s high non-performing loan (NPL) ratio, subpar risk management practice, concentration in ownership, high cost-to-income ratio and gaps in regulatory compliance. We have also considered the macroeconomic challenges and the attendant impact on households and businesses.

The Sponsor is Nigeria’s largest microfinance bank, with total assets and gross loans of ₦95.5 billion and ₦86.8 billion respectively as at 31 December 2021. LAPO MFB focuses on providing facilities to low-income individuals/households, small-scale traders and micro enterprises