Fitch Ratings has placed First Bank of Nigeria’s (FBN) subordinated notes, which are rated ‘CCC’/’RR5’, on Rating Watch Positive (RWP). The notes were issued through FBN Finance Company BV, a special purpose vehicle, which was established to provide funding for the bank. FBN’s other ratings are unaffected by this rating action.
The rating action follows publication of an exposure draft (Exposure Draft: Global Bank Rating Criteria) on 12 December 2017. The exposure draft includes a proposal to append ‘+’ or ‘-‘ modifiers to ‘CCC’ Long-Term Issuer Default Ratings (and long-term debt ratings) to denote relative status/creditworthiness within this rating level.
Key Rating Drivers
The subordinated debt of FBN is rated one notch below FBN’s ‘b-‘ Viability Rating (VR). If modifiers are introduced to the ‘CCC’ IDR category as proposed, the one notch differential would be maintained and FBN’s subordinated debt would be rated ‘CCC+’.
The notching from the VR reflects higher-than-average loss severity for subordinated debt relative to senior debt. No additional notches for non-performance risk have been applied.
The ratings on the subordinated notes are sensitive to a change in FBN’s VR.
Fitch expects to resolve the RWP within the next six months upon the conclusion of the Exposure Draft period.
If the final criteria are substantially similar to the Exposure Draft, then the rating on the subordinated notes is likely to be upgraded to ‘CCC+’ after the final criteria are published.