GCR cuts Shelter Afrique rating

Pan-African housing financier Shelter Afrique has lost its top credit rating attributed to recent concern over the state of its finances.

Global Credit Rating (GCR) said the housing lender national long-term rating has been downgraded to B (KE) from A+(KE) while short-term rating has fallen to B (KE) from A1(KE).

The downgrades, that also included international ratings, are significant as it can affect cost of borrowing from international financial markets.

Worse still, the new ratings have been given a ‘watch’ status meaning they are likely to be reviewed soon.

GCR said Shelter Afrique has no capacity to meet its loan obligations in 2017 despite new funding, based on its cash flow.

It singled out scheduled repayments of Sh11.2 billion. “GCR estimates that the company’s available cash resources and expected inflows are inadequate to cover scheduled repayments on borrowings of Sh11.2 billion this year,” it said.

GCR also observed that Shelter Afrique’s fundraising capacity had been adversely affected by falling investor confidence informed by alleged accounting malpractices and the subsequent findings of a forensic investigation by audit firm, Deloitte.

In January, Shelter Afrique issued a profit warning saying it risked suffering a 25 per cent drop in profit owing to its inability to lure new customers for its loans and a poor repayment regime by African governments which raised.

It said the lender’s short-term sustainability was solely dependent on its successful engagement with local and international lenders, loan repayments and prompt cash injection by shareholders.

This came hardly a month after a forensic audit confirmed allegations of creative accounting and subprime lending at the financier.