Moody’s assigns an investment grade rating to BOAD

Lomé, 21 May 2015. On 15 May 2015, Moody’s assigned a first issuer credit rating of Baa1 to the West African Development Bank (BOAD) for foreign and local currency transactions. This rating places BOAD in the restricted circle of “investment grade” ratings as opposed to speculative grade ratings. The rating outlook is stable. BOAD ranks fourth in Africa just behind the African Development Bank (Aaa), Botswana (A2) and Africa Finance Corporation (A3).

According to the press release issued for that purpose by the rating agency, this rating is based on “a very sound liquidity position” and a strong commitment from shareholders, mainly regional members, to provide support despite their limited resources. Moody’s noted that “BOAD could get refinanced through its rediscount facility with the Central Bank, an element which consolidated its intrinsic liquidity position. Taking this for emergency liquidity assistance, BOAD has never used this facility. Among the institutions rated by Moody’s, only the European Investment Bank (EIB), -Aaa-rated with stable outlook- has a similar rediscount facility with a central bank, namely the European Central Bank”.

Liquidity of cash assets

Moody’s believes that “this facility not only ensures liquidity of BOAD’s cash assets composed, inter alia, of other debt instruments issued by the WAEMU countries, but also provides access to a flexible vehicle for supplying emergency liquid assets. As at FYE2014, the aggregate cash assets held by BOAD accounted for 18% of total assets and largely covered debt repayment. Moody’s further believes that in 2014, the short-term debt plus long-term debt maturing represent 45% of the discounted liquid assets”.

Furthermore, the rating agency highlights that “eligibility of BOAD’s own debt instruments as collateral for refinancing with the Central Bank consolidates its borrowing capacity in the relatively liquid regional capital markets”.

Stable outlook

Moody’s concluded that BOAD rating outlook is stable. “The assumption of a decline in BOAD’s capital adequacy while carrying on with its development plan is already included in the rating. Such stable outlook is consolidated by the fact that Moody’s also looks forward to the strengthening of the Bank’s internal risk management system, concurrently with increased debt level”.

Moody’s affirms that the rating assigned to BOAD could improve if the Bank exercises caution in developing its credit activities and increasing its results, by continuing to post a low percentage of non-performing loans and upgrading its risk management procedures and showing its ability to issue debt in the international capital markets”.

A major milestone of the 2015-2019 strategic plan

This “investment grade” rating assigned in the international capital markets is a key element of BOAD’s strategy for supporting the member countries of the West African Economic and Monetary Union (WAEMU) in the drive towards economic emergence. Under its 2015-2019 strategic plan, BOAD clearly reaffirms its ambition to be “a solid development bank for economic integration and transformation in West Africa”.