Shelter Afrique seeks to reinstate Moody’s rating

Pan-African housing financier Shelter Afrique will approach global ratings agency Moody's for resumption of international ratings as it seeks to raise turnaround capital.

Moody’s withdrew the Caa1 credit rating for the institution in 2017, nearly a year after it lost its top credit rating. This followed financial turbulence amid claims of mismanagement and embezzlement.

“We will diversify the ownership structure to improve the quality of the capital structure and have the ability to invite other prospective shareholders by 2020, mobilise equity capital from existing and new members of at least $20 million (about Sh2 billion) per year,” says Shelter Afrique in its annual report.

“(We also seek to) achieve financial viability by 2020 and financial sustainability by 2023, mobilise debt capital of a minimum $200 million (about Sh20.6 billion) by 2023 (and) achieve rating equivalent to Moody’s of Baa3 by 2023.”

At the time it lost its rating, former Shelter Afrique acting managing director Femi Adewole said it had requested for the withdrawal.

“Shelter Afrique wrote to Moody’s to withdraw from the rating. The reason is that at present we are executing a turnaround for the institution: the rating is not particularly useful to us,” he told Business Daily.

Moody’s says it may withdraw a credit rating for several reasons. They include when an entity provides “incorrect, insufficient or inadequate information” to effectively assess the creditworthiness or when a firm is faced with bankruptcy or liquidation. The ratings agency can also stop its ratings when a firm being rated requests the withdrawal or is in the process of reorganising.

In 2016, Shelter Afrique turned to the 44 member states that are shareholders for Sh9.2 billion to steady its finances after year of turbulence. The agency sunk deeper into the red for the financial year ended December 2018 after its loss extended by 18.5 percent to $9.23 million (Sh940.8 million).

The financier’s bad loans hit Sh10.4 billion at the end of December last year, the lender reported.

A rating downgrade or withdrawal is significant because it can affect how much it costs an institution to borrow from international financial markets.