Moody's assigns BOAD hybrid Ba1

Moody's Investors Service said it assigned a Ba1 long-term rating to the West African Development Bank's (BOAD) planned offering of $500 million of subordinated securities. The rating is on review for downgrade, in line with BOAD's long-term issuer foreign-currency rating, which remains unchanged at Baa1 and on review for possible downgrade.

The securities have a maturity of 60.75 years and a first reset date at 5.75 years and every five years afterwards. From the second reset date onwards, the coupon increases by 100 basis points.

“The Ba1 rating assigned to the hybrid debt is three notches below the bank's long-term issuer and senior unsecured ratings of Baa1 on review for potential downgrade. The three-notch rating differential reflects the deeply subordinated nature of the hybrid debt,” Moody’s said in a press release.

The security’s term gives the bank the option to cancel interest payments and a mandatory trigger to cancel interest payments if the bank's equity to assets ratio drops below 18%. Additionally, both the optional and the mandatory coupon skip are noncumulative. BOAD cannot issue preferred shares that would rank junior to the hybrid debt.

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