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Fitch Upgrades Outlook for Morocco’s Fertilizer Giant OCP

by Radarr Africa
written by Radarr Africa

American rating agency Fitch yesterday released a report upgrading its rating for OCP’s long-term issuer default rating from bb to bb+, reflecting the company’s ability to meet its long-term financial obligations.

Yesterday’s Fitch report explains that OCP’s positive outlook is primarily due to the company’s position as a top-three global phosphate fertilizer producer able to offer customers competitive prices.  

A second factor underpinning the upgrade of OCP’s outlook is the recent improvement in Morocco’s outlook, as the majority shareholder of OCP at 94%, the report argues.

OCP’s projected record profits are also a major factor underpinning the enhanced outlook. The group’s revenues (EBITDA) are set to reach a record MAD 50 billion ($4.6 billion) on the backdrop of China’s restricting fertilizers export.

While fertilizer prices are expected to stabilize in the upcoming two years, the group plans to increase production more than offsets the drop in prices. Fitch expects OCP’s revenues to reach MAD 40 billion ($3.6 billion) in 2023, and roughly MAD 24 billion ($2.2 billion) in 2024.

ALSO READ: Morocco’s Afriquia Gaz Acquires Total Energies’ Mauritanian Subsidiary of French Energy group

Fitch forecasts that OCP is set to strengthen its market position as a leading producer and exporter of phosphate fertilizers. The group’s strategy to focus on providing tailor-made fertilizer while boosting its market footprint would allow the company to maintain long-term stable profit margins.

Noting the company’s strategy in dealing with current supply bottlenecks, Fitch maintains that while rising ammonia and sulfur prices increased the production cost in 2021 and the first half of 2022, high fertilizers prices and low production cost would have cushioned the effect of rising production costs.

OCP historically relied on Russia to secure half of its ammonia requirement. After the start of the Ukraine war, the company turned to the Middle East, Trinidad, and Tobago, and the US, Fitch explains, adding that the recent joint venture agreement with Koch Ag & Energy Solutions would support the company to secure future needs of raw materials.

SOURCE: Morocco news

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AfricaAFRICA NEWSBusinessGhanaNewsWestern Africa

Ghana’s return to capital market may take 3 years due to impact of downgrades

by Radarr Africa
written by Radarr Africa

Ghana’s return to the International Capital Market may not materialise anytime soon due to the negative impact of downgrades on its economy by international rating agencies, Finance Minister, Ken Ofori-Atta has lamented.

The three rating agencies, Fitch, Moody’s and Standard & Poor’s have all downgraded the country’s credit worthiness to junk status.

According to him, the government needs to work on its current economic downgrade and other fiscal measures in order to have easy access to the market.

“Returning to the International Capital Market is going to take a bit of time. It will take about two to three years before we can be able to work on our ratings before that time. The recent downgrade is very unfortunate”, he said.

He was speaking at a press conference on the state of Ghana’s economy on September 28, 2022.

Ghana has been out of the international market due to various unfavorable economic conditions occasioned by a weak local currency and high debt levels.

According to Mr. Ofori-Atta, the current downgrade of the country’s rating by some international ratings agencies – Fitch, Moody’s, and Standard and Poor’s will be reversed through policy measures in the next few years, preparing the grounds for Ghana to go back to the International Capital Market.

He maintained that it will be prudent for managers of the economy to critically assess the economic situation before returning to the capital market in the next two or three years to avoid high coupon rates.

Giving his opinion on the recent downgrade of Ghana’s economic status by Fitch, Mr. Ofori-Atta described the move as very unfortunate and likely to have an adverse effect on Ghana’s bond market.

ALSO READ: Fitch downgrades Ghana to further ‘junk’ status

He criticised a recent Bloomberg story suggesting that Ghana is going to restructure its domestic debt as the reason behind the recent downgrade of the country’s credit rating by Fitch.

With Ghana currently in talks with the International Monetary Fund, the Finance Minister is hopeful a deal will be closed to restore investor confidence in the economy.

Again, he wants the deal to be finalised before the next budget (2023) presentation in November 2022.

Source: My joy online

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AfricaEconomyGhanaWestern Africa

Fitch downgrades Ghana to further ‘junk’ status

by Radarr Africa
written by Radarr Africa

Ghana’s Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) have been lowered by rating agency Fitch from “CCC” to “CC” or further junk status.

This is the second time in 2022 that it has downgraded Ghana’s credit worthiness. It is also coming two days after President Akufo-Addo took a swipe at ratings agencies at a UN Conference for unfairly assessing and rating African countries poorly at a time the global economy was going through difficult period.

The downgrade, it said, reflects the increased likelihood that Ghana will pursue a debt restructuring given mounting financing stress, with surging interest costs on domestic debt and a prolonged lack of access to Eurobond markets.

“There is a high likelihood that the International Monetary Fund support programme currently being negotiated will require some form of debt treatment due to the climbing interest costs and structurally low revenue as a percentage of Gross Domestic Product”.

“We believe this will be in the form of a debt exchange and will qualify as a distressed debt exchange under our criteria”, it explained.

The government has not confirmed or denied press reports that Ghana is preparing to negotiate a restructuring.

The rating agency added interest costs on external debt are lower than for domestic debt and near-term external debt amortisations appear manageable.

“However, we believe there could be an incentive to spread a debt restructuring burden across domestic and external creditors and therefore do not have a strong basis to differentiate between Foreign- and Local-Currency ratings at this time”

High debt service, financing constrained

The country’s interest costs reached 47.5% of revenue in 2021 and 54% in the first half of 2022. Interest payments on domestic debt also hovered around 75% of total interest costs.

This, Fitch said, reflects high yields on domestic debt, which have climbed following a 34% year-on-year spike in inflation as of August 2022 and monetary tightening, with the Bank of Ghana hiking its policy rate to 22.0%, from 14.5% in February 2022.

ALSO READ: Sovereign debt default ‘a real possibility’ for Ghana, says Fitch director

Again, yields on the 91-day Treasury bill reached 27.0% in August 2022, up from 12.5% in August 2021, whilst 10-year yields have spiked to above 35% in September 2022, from around 20% in quarter one 2022.

Limited access to external financing

Fitch also said it expects external financing access to stay limited until at least an IMF programme is agreed, as Ghana is likely to remain locked out of Eurobond markets, which had been the country’s regular source of external financing.

The government obtained a $750 million term loan from African Export-Import Bank (BBB/Stable this year and $250 million in syndicated loans from global commercial banks. It can also use its sinking fund.

“We estimate Ghana faces around $3 billion of external debt service costs in 2023, including amortisation and interest”, it added.

Source: My joy online

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AfricaAFRICA NEWSBusinessGhanaNewsWestern Africa

Fitch projects Ghana’s interest cost to exceed 45% of revenue till 2024

by Radarr Africa
written by Radarr Africa

Fitch, a global rating agency, is projecting an interest cost of more than 45% of revenue for Ghana from now till 2024.

It says government interest costs reached 47.5% of revenue in 2021, considerably above the current ‘B’ median of 10.7%.

“Interest costs largely reflect high yields on domestic debt. Yields have climbed higher in 2022, following inflation spikes and monetary tightening by the Bank of Ghana (BoG)”, it mention.

Furthermore, it said “yields on the 91-day treasury bill reached 26% in July 2022, up from 12.6% in July 2021. Moreover, the government has reported under-subscribed yields, necessitating the tapping of existing medium-term issuance”.

It also said the government has increased its outstanding advances with the Bank of Ghana, providing some additional domestic financing and could conduct another private debt placement with the Central Bank as it did in 2020.

However, the rating agency said, such a measure would necessitate parliamentary approval.

Indeed, yields on T-bills have surpassed 27% and that could increase interest cost further.

Interest payments for first 5 months hit ¢17.84bn

The government in the first five months of this year spent ¢17.84 billion to service interest and amortisation on debt, the Bank of Ghana indicated in its July 2022 Monetary Policy Report.

This was higher than the envisioned target of ¢16.54 billion.

Domestic interest payments as of May 2022 accounted for 76.7% of the total interest payments.

Source: My joy online

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AfricaAFRICA NEWSBusiness and EconomyGhanaNewsWestern Africa

Fitch downgrades Ghana to ‘CCC’ days after poor S&P grading

by Radarr Africa
written by Radarr Africa

Fitch, a global rating agency, has downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘CCC’ from ‘B-‘.

The downgrade, it said, reflected the deterioration of Ghana’s public finances, which had contributed to a prolonged lack of access to Eurobond markets, in turn leading to a significant decline in external liquidity.

“In the absence of new external financing sources, international reserves will fall close to two months of current external payments (debits in the current account) by end-2022,” it said.

The government is seeking a programme from the International Monetary Fund (IMF) to help to address the challenges facing the economy.

Fitch said “the government’s high-interest costs and structurally low revenue as a percentage of Gross Domestic Product have increased the likelihood that IMF support would necessitate some form of debt treatment, although this is not our main scenario. The high-interest burden on local-currency debt also means that the inclusion of a domestic debt treatment cannot be ruled out.”

IMF deal timing uncertain

The rating agency is of the view that a deal with the IMF is likely within the next six months.

“We estimate that a programme could disburse as much as $3 billion and unlock budget support from other multilateral lenders. However, the timing of such a deal is uncertain and would be dependent on the government’s ability to present a credible fiscal reform plan in line with increasing government revenue and improving debt affordability metrics”.

The most recent IMF debt sustainability analysis, conducted in 2021, found Ghana at a high risk of debt distress and vulnerable to shocks from market access and high debt servicing costs

On tight external debt servicing schedule, Fitch estimates that Ghana faces $2.75 billion of external debt servicing in 2022, including amortisation and interest, and $2.8 billion in 2023.

Access to external financing

“Access to external financing will remain tight, as Ghana is likely to remain locked out of Eurobond markets, which had come to be a regular source of external financing for the government,” it stressed.

“In 2022, we expect that the government will meet its external debt obligations, in part, through a combination of a $750 million term loan from the African Export-Import Bank (BBB), $250 million in syndicated loans from international commercial banks, and up to $200 million from the government’s sinking fund,” it said.

“It said “The 2022 mid-year policy review indicates that the government expects to source the rest from the IMF and other multilateral lenders. In the absence of an approved programme by the end of the year, the government would have to draw more heavily on its international reserves, which were USD7.6 billion, including oil funds and encumbered assets, as of June 2022.”

High interest costs, low revenue

Fitch said the government’s high interest costs and low revenue would continue to be impediments to fiscal consolidation efforts.

The 2022 Budget’s medium-term fiscal framework had envisaged narrowing the deficit to below the existing deficit ceiling of five per centof GDP by 2024.

The expected consolidation was based on the expiry of pandemic-related expenditure items and a significant increase in domestic revenue, driven by new taxes, including a levy on electronic transactions.

ALSO READ: S&P Global affirms Ghana’s rating CCC+, Outlook Negative

The rating agency said delays in implementing the new revenue measures have resulted in lower revenue and a larger nominal deficit in half-year 2022 relative to budget forecasts.

However, the 2022 mid-year fiscal policy review presented in July contains an updated fiscal deficit forecast of 6.6 per centof GDP compared with the original deficit forecast of 7.4 per cent, owing to an upward revision in nominal GDP.

“We forecast the 2022 fiscal deficit at 8.1 per cent of GDP; this is inclusive of energy-sector clean-up costs not contained in the government’s figure. The possibility of new revenue measures could lead to a further shrinkage of deficit in 2023, but the government’s slim majority in parliament could frustrate attempts to raise tax rates or implement new taxes,” Fitch mentioned.

Source: Ghanain Times

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AfricaBanking, Finance & InvestmentBusinessNewsNigeriaWestern Africa

Fitch affirms 10 Nigerian Banks at ‘B’, Outlook Stable

by Radarr Africa
written by Radarr Africa

Fitch, the global rating agency, has affirmed Long-Term Issuer Default Ratings (IDR) of 10 Nigerian banks at ‘B’ with a stable outlook.

In a fresh report obtained from its website, the global rating agency listed the 10 lenders to include: Zenith Bank Plc, Access Bank Plc, Guaranty Trust Holding Company Plc (GTCO), Ecobank Transnational Incorporated, Stanbic IBTC, United Bank for Africa, First City Monument Bank, Sterling Bank, Wema Bank and Fidelity Bank.

The agency said it has withdrawn Support Rating and Support Rating Floor as they are no longer relevant to Fitch’s coverage following the publication of its updated Bank Rating Criteria on November 12, 2021.

In line with the updated criteria, “We have assigned a Government Support Rating (GSR) of ‘no support’’ (ns),” it stated.

For Zenith Bank, Fitch also affirmed National Long-Term Rating at ‘AA-(nga)’ and Viability Rating (VR) at ‘b’.

It noted that Zenith’s Long-Term IDR is driven by its standalone creditworthiness, as expressed by its VR, among other reasons.

According to Fitch, Zenith is Nigeria’s second-largest banking group, representing 15 per cent of domestic banking system assets at end-2021.

It also noted that the lender has moderate credit concentrations; improving asset quality; strong profitability; strong capitalisation and stable funding profile.

Fitch Ratings, while affirming Access Bank’s Long-Term Issuer Default Rating (IDR) Viability Rating (VR) at ‘b’ and National Long-Term Rating at ‘A+(nga)’, said the bank’s Long-Term IDR is driven by its standalone creditworthiness, as expressed by its VR. The VR factors in a leading franchise, healthy loan quality and strong revenue diversification, profitability and liquidity coverage.

The agency also observed that the lender has significant credit concentrations; improved loan quality and strong profitability.

Similarly, Fitch Ratings, while affirming Nigeria-based Guaranty Trust Holding Company Plc (GTCO) at ‘B’ with stable outlooks and National Long-Term Ratings at ‘AA(nga)’, stated that the Long-Term IDRs of GTCO and GTB are driven by their standalone creditworthiness, as expressed by their Viability Ratings (VRs) of ‘b’.

“The National Ratings are driven by GTCO’s and GTB’s standalone strengths. They are at the higher end of the scale given GTCO’s and GTB’s strong business and financial profiles.

“VRs equalised with Group VR: GTCO is the bank holding company (holdco) for GTB. The VRs of GTCO and GTB are the same as the group VR,” it stated.

Fitch Ratings further affirmed Ecobank Transnational Incorporated’s (ETI) Long-Term Issuer Default Rating (IDR) at ‘B-’ with a stable outlook and Viability Rating (VR) at ‘b-’.

ETI’s Long-Term IDR was driven by its standalone creditworthiness, as expressed by its VR of ‘b-’. ETI is the non-operating bank holding company (BHC) of Ecobank Group. Its VR is notched down once from the ‘group VR’ of ‘b’ due to high common equity double leverage (153 per cent at end-2021).

The agency upgraded Fidelity Bank Plc’s Long-Term Issuer Default Rating (IDR) to ‘B’ from ‘B-’. The outlook is stable. The upgrade reflects Fidelity’s improving business profile and resilient financial metrics.

Fitch also upgraded Fidelity’s National Long-Term Rating to ‘A(nga)’ from ‘BBB+(nga)’, reflecting the bank’s increased creditworthiness relative to other issuers in Nigeria. A full list of rating actions is below.

According to the agency, the VR reflects healthy asset quality, good business profile and reasonable capitalisation and liquidity.

These are balanced against high sensitivity to Nigeria’s challenging operating environment as well as higher credit concentration as a percentage of equity and weaker profitability than larger domestic-rated peers.

Stanbic IBTC Holdings PLC (Stanbic IBTC) and its 99.9 per cent owned subsidiary, Stanbic IBTC Bank PLC, were affirmed at ‘AAA(nga).’

The National Ratings of Stanbic IBTC and Stanbic IBTC Bank are based on potential support from their ultimate parent, South Africa’s Standard Bank Group Limited (SBG; BB-/Stable), which owns 67.5 per cent of Stanbic IBTC.

The ratings reflect SBG’s willingness and ability to support Stanbic IBTC and Stanbic IBTC Bank, if required.

ALSO READ: Ecobank declares $261m pre-tax profit in H1

First City Monument Bank (FCMB) Limited’s Long-Term Issuer Default Rating (IDR) was also affirmed at ‘B-’ with a stable outlook and Viability Rating (VR) at ‘b- .’

Fitch has also upgraded the bank’s National Short-term Rating to ‘F1(nga)’ from ‘F2(nga)’ due to the bank’s improving funding and liquidity.

In line with the updated criteria, “We have assigned FCMB a Government Support Rating (GSR) of ‘no support’ ‘(ns),” it stated.

The VR reflects FCMB’s exposure to Nigeria’s volatile operating environment, a small franchise and high credit concentrations.

This is balanced by the bank’s improving funding and liquidity, moderate capitalisation and adequate asset quality for the rating. According to the agency, the latter partly reflects its fairly small loan book (45 per cent of total assets) and large non-loan assets comprising mainly Nigerian government securities (B/stable).

Fitch Ratings affirmed United Bank for Africa (UBA) Plc’s Long-Term Issuer Default Rating (IDR) at ‘B’ with a stable outlook as well as its Viability Rating (VR) at ‘b’ and National Long-Term Rating at ‘A+(nga)’.

UBA’s IDRs are driven by its standalone creditworthiness, as reflected in its ‘b’ VR. The VR considers UBA’s exposure to the Nigerian volatile operating environment, but also the bank’s healthy profitability and adequate capitalisation, which provide reasonable capacity to absorb losses from an economic downturn.

Wema Bank Plc’s Long-Term Issuer Default Rating (IDR) was affirmed at ‘B-’ with a Stable Outlook, Viability Rating (VR) at ‘b-’ and National Long-Term Rating at ‘BBB(nga)’.

Wema’s IDRs are driven by its standalone creditworthiness, as expressed by its VR. The VR reflects Wema’s small franchise, high credit concentrations, aggressive loan and balance-sheet growth and funding weaknesses.

It also reflects good asset quality and our expectation of a significant improvement in capitalisation and leverage, due to a material rights issue due to be concluded by end-2022.

For Sterling Bank Plc, Fitch Ratings affirmed its Long-Term Issuer Default Rating (IDR) at ‘B-’ with a Stable Outlook, Viability Rating (VR) at ‘b-’ and National Long-Term Rating at ‘BBB+(nga)’.

Sterling’s IDRs are driven by its standalone creditworthiness, as expressed by its VR of ‘b-’. The VR reflects Sterling’s sensitivity to Nigeria’s challenging operating environment, a fairly small franchise, high credit concentrations and weaknesses in the bank’s foreign-currency (FC) funding profile. These are balanced by healthy asset quality metrics and reasonable capitalisation the rating agency noted.

Source: Nigerian Tribune

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