Moody’s improves AFC’s outlook to stable from negative
...Affirms A3 long-term issuer and senior unsecured ratings
Africa Finance Corporation (AFC), Africa’s leading infrastructure solutions provider, received a boost to its credit rating outlook from Moody’s Investors Service, which has assigned a “stable” outlook.
The decision ratifies the second-highest investment-grade ranking among African institutions for AFC as Moody’s affirmed the Corporation’s long-term issuer and senior unsecured ratings at A3 and short-term issuer ratings at P-2.
Analyst at Moody’s said in a statement that the stable outlook underlines the resilience of AFC’s credit profile in the face of a significant shock from the Covid-19 pandemic.
“The corporation’s capital adequacy has strengthened due to a slight decrease of its leverage ratio, in light of developments during the past year, Moody’s expects AFC to maintain its intrinsic financial strength, with strong capital adequacy and asset performance, liquidity, and funding,” Moody’s analysts concluded in a statement.
Moody’s further revealed that AFC’s A3 rating is underpinned by its intrinsic financial strength, which includes a capital position as measured by its Basel II ratio that increased to 34.1 percent in 2020 from 32.9 percent in 2019.
AFC’s funding and liquidity indicators exceed the average for A-rated peer institutions, with a 54 percent ratio of liquid assets to total assets at end-2020, compared to 50 percent for peers.
Despite weaker market conditions, AFC’s availability of liquid resources increased to 125 percent of projected cash outflows in 2020, from 121 percent in 2019, significantly above the median of 83 percent for A-rated peers, enhanced by a demonstrated access to market funding.
Moody’s decision is critical as AFC leverages its top-tier credit ratings to achieve among the lowest borrowing costs of any institution on the continent and channels that capital into vital energy, transport, telecommunications, and natural resources infrastructure that drive local manufacturing and job creation.
Over the years, AFC has invested over $8.7 billion in projects across 35 African countries; however more is needed as the continent’s worst recession in decades has widened already substantial infrastructure financing needs to be estimated at $130 to $170 billion per year.
Investors demonstrated their support for AFC’s business model in April by ordering almost four times more than the $750 million raised in seven-year Eurobonds at a record-low yield.
The funding adds to commitments from an inaugural green bond last year along with syndicated loans and concessional credit lines resulting from AFC’s strong partnerships with commercial banks and development finance institutions, Moody’s reported.
“A $60 million raise from new shareholders combined with the issuance of $200 million of equity warrants to the Central Bank of Nigeria and a self-contribution of $115 million to reserves from AFC’s 2019 profits serves to illustrate ongoing strong support from stakeholders,” Moody’s said.
Furthermore, AFC was recently named as an eligible organization for providing Official Development Assistance through the OECD Development Assistance Committee.
In response, Samaila Zubairu, President and CEO, AFC, promised to continue making intentional efforts that will accelerate development impact by creating jobs for young Africans seeking opportunities for a better livelihood