Fitch Assigns ‘B(EXP)’ Rating to UBA’s $500 mln senior unsecured debt notes

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Lagos-23 May 2017: Fitch Ratings has today assigned an expected rating of ‘B(EXP)’ to Nigeria’s United Bank for Africa Plc’s (UBA) proposed senior unsecured medium-term notes. UBA plans to raise between USD350 million and USD500 million of fixed-rate five-year bonds.

Based on Fitch’s assessment on expected recoveries in a liquidation scenario, an expected Recovery Rating (RR) of ‘RR4(EXP)’ is also assigned to the notes, implying average recovery prospects.

The notes will constitute senior unsecured obligations of UBA and will be used for general corporate purposes.

The assignment of the final rating is contingent on the receipt of final documents conforming to the information received to date.

The expected 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 an RR to the entity’s issues. RRs provide greater transparency on the recoveries component of Fitch’s assessment of the credit risk of low-rated issuer’s securities.

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 its Viability Rating (VR) of ‘b’. 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.

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