FSDH Series 1 SPV Bonds get upgrade to BBB+, Stable Outlook from GCR Rating

THE NATION AL SCALE longterm issue of First Securities Discount House (FSDH) Funding Special Purpose Vehicle (SPV) Plc’s Series 1 Tranche A Bonds have received a rating upgrade to BBB+ (NG) from GCR Ratings, which also affirmed A-(NG) to the company’s Series 1 Tranche B Bonds on a national scale long-term issue rating with stable outlook.

GCR Ratings, an emerging market focused rating firm, in a statement noted that the Series 1 Tranche A and Tranche B Bonds were issued in February this year under FSDH Funding SPV Plc.’s N30 billion Debt Issuance Programme.

In a statement over the weekend, the emerging market rating agency explained that the issuer was established by the merchant banking subsidiary of FSDH Group (FSDH Merchant Bank Limited) for the purpose of raising funds for the firm (FSDH), which is also the sponsor.

It further stated that the supporting resolution of the board of directors at FSDH has allowed for the directors to issue the bonds in tranches, different forms, and under different terms and conditions as it may deem fit and subject to the approval of the relevant regulatory authority. “The Series 1 Tranche A Bonds constitute direct, unsecured and subordinated obligations of the Issuer, ranking pari passu without any preference among themselves,” the statement reads.

On the other hand, the company stated that the Series 1 Tranche B Bonds are senior unsecured obligations of the issuer, and rank pari passu among themselves and equally with all other existing and future unsecured, unsubordinated obligations of the issuer, while adding that the proceeds from the capital raising will be used to expand the credit risk asset base of the sponsor.

“While the issuer is FSDH Funding SPV Plc, repayment of the obligations under the issues ultimately depends on the performance of the sponsor, as the direct obligor of the issues. Thus, the accorded rating is linked to FSDH’s standing and financial position. FSDH has been accorded a long-term national scale credit rating of A-(NG) with a Stable Outlook in October 2021,” GCR said.

Furthermore, GCR Ratings reported that the upgrade of the Series 1 Tranche A Bonds to BBB+ (NG) is driven by a change in GCR Criteria, which stipulates one notch down rating for senior subordinated notes while the Series 1 Tranche B Bonds rating was affirmed at A-(NG) as the rating agency considers the bonds to rank at par with FSDH’s long-term Issuer credit rating.

However, the stable outlook, according to GCR Ratings, reflects an opinion that the financial profile of the sponsor will remain stable over the next 12-18 months.

“While the risk-weighted asset is expected to increase significantly due to high loan book growth, we expect FSDH’s capitalisation to remain firm within the high band over the rating horizon. Also, credit losses are expected to moderate with minimal adverse credit migration,” the rating agency said