In order to access long-term funds from the capital market for its refinancing activities, The Nigeria Mortgage Refinance Company Plc (NMRC) has said it is concluding arrangements to raise up to N10 billion by issuing 15-year bonds, as part of its N140 billion Medium Term Note Programme.
Housing News learnt that the proposed bond is considered an impact bond as it is expected to provide the much-needed funding that will engender increased mortgage lending in the Nigerian housing sector, with an expected multiplier effects on the broader economy at large.
After a review of the strength of the Issuer and the merit of the bond’s structure, Global Credit Rating Company, an international recognised and fully accredited rating agency, has accorded an ‘Aaa’ credit rating to the Bond, and NMRC obtained an investment grade credit Issuer Rating of ‘BBB+’.
According to market watchers and analysts, the rating underscores the confidence reposed on the management of NMRC, the governance and risk management structure and the credit support provided by the FGN. They expressed belief that the ‘AAa’ investment grade rating is an affirmation of the underlying credit strength of the bond, which is a new asset class that will diversify the portfolio of long-term investors.
In its report, the rating agency noted that the rating reflected the strength of the proposed business model, financial projections and assumptions as well as the various risk mitigating mechanisms of NMRC.
In assigning the rating, the rating agency considered the strong shareholder base, strong board profile (majority of which are executive management in owner institutions) and quality of the management. The strong support enjoyed by the Issuer from federal government (as evident in the FGN Guarantee) and other international development agencies; including the World Bank and IFC, form the rationale behind the bond’s rating.
The proposed Series 1 Bond being issued under the Medium Term Note Programme will be utilised to refinance with full recourse, mortgage loans originated by eligible mortgage lending banks. To be eligible for refinancing, the mortgage loans must conform to NMRC’s Uniform Underwriting Standards. NMRC’s refinancing will be secured by the mortgage lenders securing their mortgage loans as collateral for the facility, which must be at least 125 per cent the value of the refinancing amount.
The Notes will constitute direct, secured and unconditional obligations of the Issuer and shall rank pari passu in all respects without discrimination, preference or priority.
According to the Financial Advisers, NMRC’s ‘Aaa’ bond rating will engender market confidence in the credit standing of NMRC as a bond issuing entity and enhance its access to the capital markets.
NMRC is a private sector-driven company with the public purpose of developing the primary and secondary mortgage markets by raising long-term funds from the domestic capital market as well as foreign markets that will promote accessible and affordable housing in Nigeria.
NMRC obtained its operational licence from the CBN on February 18, 2015 to conduct mortgage refinancing business in Nigeria. The company has a mandate to encourage and promote home ownership in Nigeria by providing financial facilities to the mortgage lenders, thereby increasing the availability and affordability of mortgage loans to Nigerians.
NMRC Chief Executive Officer, Prof Charles Inyangete, noted that “the ‘Aaa’ rating of our bond underscores our solid balance sheet, responsible fiscal management and relentless attention to risk management. With this rating, we believe our cost of capital will remain relatively low thereby enhancing NMRC’s ability to favourably tap the capital market and pass on these benefits to home borrowers through our mortgage lending member banks.”
*You are invited to the 9th Abuja Housing Show Day one (6th July, 2015 at International Conference Centre, Abuja) where NMRC will be having a Round Table Discussion on Affordable Mortgage Finance in a Change Agenda of the new administration. Others that will feature at the event include FMBN, CBN, SEC, REDAN, PMI’s and TUC among others. Visit www.housingnews.org.ng to register for 9th Abuja Housing Show.