Agusto & Co. assigns a ‘Bbb’ rating and a ‘negative’ outlook to Wema Funding SPV Plc Series II ₦17.7 billion 7-year Fixed Rate Bond Issue under the ₦50 billion Debt Issuance Programme.
The rating expires on 10 September 2021.
Agusto & Co. affirms the ‘Bbb’ rating assigned to the Series II ₦17.7 billion 7-year fixed rate bond (‘the Issue’ or ‘the Bond’) of Wema Funding SPV Plc (“the Issuer” or “the SPV”). The Issue is part of the ₦50 billion debt issuance programme (“the programme”) registered by the SPV in 2016. Wema Bank Plc (“Wema Bank” or “the Sponsor”) guarantees all bond obligations of the Issuer under the programme. The rating assigned to the Series II bond is a notch higher than the Sponsor’s stand-alone rating of ‘Bbb-’ by Agusto & Co, given the bond structure that comprises a 13.53% 7-year Federal Government of Nigeria (FGN) bond investment of ₦9.5 billion in the custody of the Joint Trustee. This provides a recovery prospect in the unlikely event of a default.
The Sponsor’s rating reflects its good liability generating capacity evidenced by a growing customer deposit base and the successful issuances of two bonds in the last four years. However, the rating is constrained by obligor concentration risk that threatens asset quality, high volume of restricted funds under the cash reserve requirement (CRR) policy and rising operational costs. The COVID-19 pandemic, which has accentuated credit risks in the lending landscape, is also a rating concern.
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