Press Release

VIS Assigns Rating to Tier-II Instrument of FINCA Microfinance Bank Limited
 

Karachi, April 22, 2019: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of ‘A-’ (Single A-Minus) to the proposed Tier-II privately placed term finance certificate (PPTFC) of Finca Microfinance Bank Limited (FINCA MFB). Outlook on the assigned rating is ‘Stable’. The instrument rating will be finalized upon review of the signed legal documents.

The assigned ratings of FINCA MFB incorporate association of the bank with FINCA Impact Finance., a global microfinance organization operating through 20 subsidiaries, including Pakistan. FINCA MFB continues to receive support from its parent through transfer of technical expertise emanating from FINCA’s global experience. The ratings also take into account sizeable loan book and various corrective measures including rebalancing of product mix towards improvement of asset quality and profitability of the bank.

FINCA MFB is in the process of issuing a rated, unsecured, subordinated Tier-II PPTFC amounting to Rs. 1.5b with the green shoe option of Rs. 500m, having a tenor of 7 years. The markup rate will be charged at 6M-Kibor+2.4%, payable semi-annually in arrears on the outstanding principal amount and will be calculated on a 365-day year basis. The proposed instrument is to redeem 0.20% of the issue amount in the first 60 months and remaining issue amount in four equal semi-annual installments starting from the 66th month. The issuer may call the PPTFCs, in part or full subject to prior SBP approval, after five years from the disbursement date on any principal redemption date with not less than 30 days’ prior notice to the trustee and the investors. The call option is exercisable only if FINCA MFB’s minimum capital requirement (MCR) and Capital Adequacy Ratio (CAR) requirements are in compliance.

The assigned rating portrays the relative risk of Tier-II instruments including feature of lock-in-clause which stipulates that neither profit nor principal will be payable (even at maturity) in respect of the PPTFC, if such payment will result in a shortfall in the issuer’s MCR or CAR. While the regulatory framework may not consider a missed interest payment as a default; such missed payments, if any, are considered an event of default in the credit rating methodology employed by VIS. In normal course of business, VIS believes that chances of non-performance risk are low.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.


Javed Callea
Advisor

Applicable Rating Criteria:
Microfinance Banks: https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Meth-MFBs201606.pdf
Notching The Issue: https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/criteria_instrument_16.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited) (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS(Formerly JCR-VIS Credit Rating Company Limited), the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS(Formerly JCR-VIS Credit Rating Company Limited) is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS(Formerly JCR-VIS Credit Rating Company Limited) is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited). All rights reserved. Contents may be used by news media with credit to VIS(Formerly JCR-VIS Credit Rating Company Limited).

VIS Credit Rating Company Limited (Formerly JCR-VIS Credit Rating Company Limited)