Fitch Ratings has assigned Togo-based bank holding company Ecobank Transnational Incorporated’s (ETI) upcoming five-year senior unsecured notes issue of up to USD500 million due in 2024 an expected long-term rating of ‘B (EXP)’ with a Recovery Rating of ‘RR4’.
The final rating is contingent upon the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The expect rating is in line with ETI’s Long-Term Issuer Default Rating (IDR) of ‘B’, as the notes will constitute the holding company’s direct, general, unconditional, unsubordinated and unsecured obligations and rank equally among themselves and with all of ETI’s other senior obligations. Fitch has assigned a Recovery Rating of ‘RR4’ to reflect average recovery prospects in a default scenario based on country-specific factors.
ETI’s Long-Term IDR is in turn driven by the group’s intrinsic creditworthiness, as captured by the entity’s ‘b’ Viability Rating (VR).
The proceeds of the notes will be used to refinance ETI’s existing debt (both external borrowing and inter-group funding). The proceeds of the notes are not intended for equity injections into ETI’s banking subsidiaries and therefore will not affect the holding company’s double leverage.
ETI’s ratings were affirmed on 2 August 2018 (see Rating Action Commentary ‘Fitch Affirms Ecobank Transnational Inc at ‘B’; Outlook Stable’ on www.fitchratings.com).
RATING SENSITIVITIES
The expected rating is linked to ETI’s Long-Term IDR. The latter is primarily sensitive to material deterioration in the operating environment of ETI’s largest market, which could lead to renewed asset quality deterioration and pressure on the group’s capitalisation. ETI’s Long-Term IDR is also sensitive to a material increase in double leverage and ETI subsidiaries’ ability to upstream dividends and other cash flow due to potential regulatory restriction.