Thursday, February 10, 2022 / 10:48 AM / by Moody's Investors Service/ Header Image Credit: Bank of Industry

Moody's Investors Service ("Moody's") has today assigned a B2 senior secured long-term foreign currency rating to the proposed Senior Note Participation Notes to be issued by BOI Finance B.V., a special-purpose funding vehicle incorporated in the Netherlands by Bank of Industry. The issuer outlook on BOI Finance B.V. is stable.

Ratings Rationale

The B2 senior secured rating assigned to BOI Finance B.V.'s proposed Senior Note Participation Notes reflects Bank of Industry's B2 long-term corporate family rating (CFR) and the application of Moody's Loss Given Default for Speculative-Grade Companies rating methodology which considers the senior notes' position within the company's funding structure.

The proposed Senior Note Participation Notes to be issued by BOI Finance B.V. will be issued for the sole purpose of funding the acquisition of a Senior Note issued by Bank of Industry. The obligations of Bank of Industry to make payment of principal and interest to BOI Finance B.V. under the Senior Note are guaranteed by an unconditional and irrevocable guarantee of the Federal Republic of Nigeria (B2 stable).

The proposed Senior Note Participation Notes to be issued by BOI Finance B.V. will be direct, general, secured and limited recourse obligations of BOI Finance B.V., and will rank rateably, without preference amongst themselves. BOI Finance B.V.'s payment obligations will be secured by a first fixed charge of certain of the Issuer's rights and interests as holder of the Senior Note and the benefit of the Guarantee.

The Senior Note issued by Bank of Industry constitutes direct, general, unconditional, unsubordinated and unsecured obligation of Bank of Industry, and will rank pari passu with all other present and future unsecured and unsubordinated obligations of Bank of Industry. The Federal Government of Nigeria has irrevocably and unconditionally guaranteed to BOI Finance B.V. as the holder of the Senior Note, the due and punctual payment of all amounts payable by Bank of Industry.

Bank of Industry's ratings also reflect its robust capital buffers, with an equity-to-total assets ratio of 20.5% as of June 2021, and low nonperforming loans to gross loans ratio of 3.4%, with the bulk of the loan book also secured against bank guarantees or federal government bonds. In recent years, the bank has also diversified its funding base through funding from international financial institutions. However, the bank's funding base remains vulnerable to investors' risk appetite, while Bank of Industry's developmental mandate, along with the difficult operating environment, will pressure its asset quality and profitability.

Outlook

Moody's has aligned BOI Finance B.V.'s stable issuer outlook with Bank of Industry's stable issuer outlook. Therefore, BOI Finance B.V.'s issuer outlook will move in tandem with Bank of Industry's issuer outlook.

Bank of Industry's stable issuer outlook is aligned with the stable outlook on the sovereign rating. This reflects the high interlinks between Bank of Industry's credit profile and that of the sovereign, given the bank's high exposures to government bills held with the Central Bank of Nigeria, and its development finance mandate and operations in Nigeria.

Factors That Could Lead to an Upgrade or Downgrade of the Rating

Upwards pressure on Bank of Industry's issuer ratings could develop from a material strengthening of the firm's operating environment and in the government's credit profile and ratings.

Downward pressure on Bank of Industry's issuer ratings could develop from a deterioration in the sovereign's credit profile, as would be indicated by a downgrade in the sovereign rating.

List of Affected Ratings

• Issuer: BOI Finance B.V.

Assignment:

• Senior Secured Regular Bond/Debenture, Assigned B2
• Outlook Action:
• Outlook, Assigned Stable