GCR Ratings (GCR) has assigned a final public national scale long-term Issue rating of BBB-_(NG) to FCMB Group Plc’s NGN20.7Bn additional tier 1 subordinated bonds, with the Outlook accorded as Stable.

Rating Rationale

The Series 1 perpetual, non-cumulative, fixed-rate, resettable, additional tier 1 (AT1) subordinated Bonds (the Series 1 Bonds) is the first to be issued under FCMB Group Plc’s (the Group or the Issuer) NGN300 billion Debt Issuance Programme. In February 2023, the Issuer raised NGN20.7 billion through the Series 1 Bonds, at a resettable fixed coupon rate of 16%, with no scheduled maturity date. The Series 1 Bonds qualify as AT1 capital of the Issuer under the approval of the regulator, Central Bank of Nigeria (CBN) and will constitute direct, unsecured, and subordinated obligations of the Issuer. The Series 1 Bonds shall rank pari passu among themselves and with any present and future parity obligations.

The net proceeds from the Series 1 Bonds will be exclusively utilised for the provision of qualifying AT1 capital to First City Monument Bank Limited (the bank). The Series 1 Bonds’ structure is solidified through an intercompany notes (the notes) agreement, the terms and conditions of which mean that the bank (the major operating entity of the Group) is contractually obliged to support the Group’s notes in line with the bank’s (currently theoretical) AT1 ranking. The notes, therefore, rank alongside such parity obligations of the bank. As a result, GCR has chosen to notch down from the bank’s A-_(NG) long-term issuer rating, and not the Group’s BBB+_(NG) long-term issuer rating.

Furthermore, GCR has chosen to apply a 3-notch differential from the senior unsecured ratings of the bank. This reflects the contractual subordination of the notes – they rank below senior unsecured and subordinated (tier two qualifying capital) bonds, interest payments are deferrable and non-cumulative, subject to the Issuer’s discretion, and lastly the fact that the Series 1 Bonds can be written down when the Issuer’s core equity tier 1 (CET1) ratio reaches 10.75% (0.25% above the regulatory minimum) or when the CBN considers the Issuer to be at a point of non-viability (PONV). As a result, GCR has assigned a final public national scale long-term Issue rating of BBB-_(NG) to the Series 1 Bonds and we believe the notes qualify for intermediary levels of capital under our methodology.

Outlook Statement

The Stable Outlook reflects that of the bank’s national scale ratings and adequate room over deferability or write down clauses.

Rating Triggers

The ratings would be sensitive to a rating action on the bank. Furthermore, if the bank or Group’s CET1 ratio lowers towards the trigger point for deferability of interest payments and/or the PONV/pre-specified trigger point we could lower the rating on the Series 1 Bonds. Non-compliance with the set covenant would trigger a negative rating action.

Ratings History

Salient Points of Accorded Rating

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security, or financial instrument.

The credit ratings have been disclosed to FCMB Group Plc. The ratings above were solicited by, or on behalf of, FCMB Group Plc, and therefore, GCR has been compensated for the provision of the ratings.

FCMB Group Plc participated in the rating process via tele-conferences, as well as other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from FCMB Group Plc and other reliable third parties to accord the credit ratings included:

• Executed Programme Trust Deed
• Executed Series 1 Trust Deed
• Executed Pricing Supplement
• Executed Master Notes Issuance Agreement
• Other relevant documents