Rikus Grobler | Oct 18, 2017 | 0
Development Bank receives separate Fitch rating, plans to issue bond
Development Bank of Namibia CEO Martin Inkumbi announced this week the Bank has received an investment grade rating of ‘BBB-‘ from Fitch, and that DBN expects to issue a bond of N$250 to N$300 million in the second half of 2017.
Talking about the practical implication of the rating, Inkumbi said that the upcoming local borrowing programme, together with an initial bond issue of N$250 to N$300 million will be boosted by the affirmation of the investment grade quality of DBN debt, and this should prove beneficial in the case of further issuing of debt by the Bank.
“DBN has previously accessed the market on an informal basis to source funding, but now with its strong governance, financial strength and the development of a treasury function, it has the opportunity to formalize these issues which will benefit DBN with diversification,” Inkumbi said, adding that Namibia’s unsecured long-term national scale rating has been upgraded from ‘AA+(zaf)’ to ‘AAA’, a further indication of the strength of the national economy.
DBN’s unsecured long-term debt rating was also set at ‘AAA(zaf)’in line with that of the state.
The rating, Development Bank of Namibia (DBN) CEO Martin Inkumbi explains is impressive, noting how the rating protects the Bank creditworthiness as investment grade bankable, and has the highest possible rating for a state-owned development finance institution (DFI), given the Namibian Government’s investment grade rating of ‘BBB-‘, DBN rating does not depend on that of government.
Inkumbi said that the ‘BBB-’ rating states that the Bank has adequate financial capacity to meet its needs, but is not immune from adverse economic circumstances. A ‘BB’ rating, which falls below ‘BBB’ would indicate that the DFI is vulnerable to adverse economic conditions, while a ‘B’ rating indicates that the DFI is more vulnerable to adverse economic conditions.
The negative outlook in the rating signifies that there are conditions prevalent that might cause the current rating to be lowered, however, this is in line with the ratings agency’s view on the Namibian Government. The rating afforded to DBN is capped at the sovereign rating.
The bond, Inkumbi said, is in keeping with the DBN’s mandate to diversify its funding sources and at the same time assist with the development of domestic financial markets. For investors, the bond, will be a high-quality investment, which will also offer portfolio diversification in the local markets where investment choices are fairly limited.