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Japan Credit Rating Agency Affirms AfDB’s AAA Rating
Tunis, 31 July 2009 – The Japan Credit Rating Agency (JCR) has affirmed its Triple A ratings on the listed outstanding debts of the African Development Bank (AfDB) and assigned AAA ratings to its eight senior notes, with a stable outlook.
In a release issued on Friday, 31 July 2009, JCR said the ratings on the AfDB are based on the strong support rendered by its regional and non-regional member countries amid the growing international assistance to Africa; its solid financial structure underpinned by a strong capital base and liquidity; its prudent financial management; and its status as a preferred creditor.
“JCR’s confirmation of the AfDB’s AAA credit rating today clearly shows that the Bank remains one of the safest issuers in the world for bond investors,” the AfDB Vice President for Finance, Thierry De Longuemar said.
The Agency noted that with reinforced strong support from member countries, AfDB continues to expand its exposure to the private sector including that of higher risks in the medium-term, adding that the Bank Group is expected to maintain its solid financial structure on the back of its prudent financial management and strong capital base.
- Reinforced support from member countries
The JCR affirmed the status of the AfDB as an essential multilateral development bank (MDB) that plays the central role in promoting economic development of African nations, with the strong support rendered by 53 African member countries and 24 non-regional member countries centering on industrialized economies. It highlighted the timely establishment of a US$1.5 billion Emergency Liquidity Facility and a US$ 1 billion Trade Finance Initiative to assist its regional member countries mitigate the negative impact of the global economic crisis.
- Asset quality improved following adoption of arrears clearance program
It noted that the AfDB’s asset quality has been improved through the implementation of arrears clearance programs to normalize non-performing loans. “AfDB has strong liquidity and keeps its leverage lower than other major MDBs. It has reviewed its prudential indicators applied to lending, equity investment and borrowing with the aim of ensuring an effective use of its capital resources. However, it continues to operate in a conservative manner and meets these requirements,” it says.
- Strong capital base with high quality
The agency underlined the fact that the AfDB maintains a strong and high-quality capital base, with its authorized capital at UA21.87 billion (USD33.7 billion) at end 2008, of which 99.5% were already subscribed. However, in response to increasing requests for financial support from the Regional Member countries, largely due to the economic crisis, the Board has authorized negotiation for the replenishment of the ADF, the concessional financing window and the a general capital increase, to meet the growing financing needs of the continent.
- Stable profit to secure operation development
The report describes the AfDB as “a credible development bank” which keeps its sound financial base to make a profit just enough to promote its development financing activities. In the recent years, AfDB has actively increased its net income transfers to the entities dedicated to development purposes such as the African Development Fund and other funds for debt relief.
The AfDB Group also enjoys triple-A ratings from the three other major rating agencies – Moody’s, Standard & Poor’s and Fitch.
* 1 UA (Unit of Account) = 1.58223 US$ on 31/07/2009