Windhoek-The Development Bank has received a ‘BBB-‘ investment grade credit rating from Fitch Ratings, the international ratings agency.
The rating, Development Bank of Namibia (DBN) CEO Martin Inkumbi explains, signals that the Bank is investment grade, and has the highest possible rating for a state-owned development finance institution (DFI), given the Namibian Government’s investment grade rating of ‘BBB-‘.
Inkumbi says that the ‘BBB-’ rating states that the Bank has adequate financial capacity to meet its obligations, but may be affected by adverse economic circumstances. A ‘BB’ rating, which falls below ‘BBB’ would indicate that the DFI is vulnerable to adverse economic conditions, while a ‘B’ rating indicates that the DFI is more vulnerable to adverse economic conditions.
The negative outlook in the rating signifies that there are conditions prevalent that might cause the current rating to be lowered, however, this is in line with the ratings agency’s view on the Namibian Government. The rating afforded to DBN is capped at the sovereign rating.
Inkumbi adds that Namibia’s unsecured long-term national scale rating has been upgraded from ‘AA+(zaf)’ to ‘AAA’, a further indication of the strength of the national economy. DBN’s unsecured long-term debt rating was also set at ‘AAA(zaf)’in line with that of the state.
Talking about the practical implication of the rating, Inkumbi says that the upcoming local borrowing programme, together with an initial bond issue of N$250 to N$300 million will be boosted by the affirmation of the investment grade quality of DBN debt, and this should prove beneficial in the case of this and further issues by the Bank.
He says that DBN has previously accessed the market on an informal basis to source funding, but now with its strong governance, financial strength and the development of a treasury function, it has the opportunity to formalize these issues which will benefit DBN with diversification.
The bond, he says, is in keeping with the DBN’s mandate to diversify its funding sources and at the same time assist with the development of domestic financial markets. For investors, the bond, will be a high-quality investment, which will also offer portfolio diversification in the local markets where investment choices are fairly limited.
DBN will leverage its financial strengths to further develop Namibia’s financial sector and economic environment, so investors can expect more, Inkumbi noted.