Fitch Ratings has assigned United Bank for Africa Plc’s (UBA) USD500 million 7.75% senior unsecured notes maturing on 8 June 2022 a final ‘B’ rating.
The final rating is in line with the expected rating Fitch assigned to the notes on 23 May 2017 (see “Fitch Assigns ‘B(EXP)’ Rating to UBA’s Senior Notes’). Based on Fitch’s assessment on expected recoveries in a liquidation scenario, a final Recovery Rating (RR) of ‘RR4(EXP)’ is also assigned to the notes, implying average recovery prospects. The final RR is also in line with the expected RR Fitch assigned to the notes on 23 May 2017
KEY RATING DRIVERS
The final rating is in line with UBA’s Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘B’.
In Fitch’s view, the likelihood of default on these notes reflects the likelihood of default of the bank. According to Fitch’s criteria, a bank’s IDR usually expresses Fitch’s opinion on the risk of default on senior obligations to third-party, non-government creditors as in Fitch’s view these are typically the obligations whose non-performance would best reflect the uncured failure of the entity.
Where a bank has a Long-Term IDR of ‘B+’ or below, Fitch usually assigns a RR to the entity’s issues. RRs provide greater transparency on the recoveries component of Fitch’s assessment of the credit risk of a low-rated issuer’s securities.
RATING SENSITIVITIES
A change in UBA’s IDR would affect the rating of the notes and may also affect recovery prospects and the RR. UBA’s IDRs are driven by the bank’s standalone financial profile, as reflected in the bank’s ‘b’ Viability Rating (VR). UBA’s VR and IDRs are primarily sensitive to further asset quality deterioration and capital deterioration as well as continued pressure on foreign currency funding and liquidity.
