@StandardMedia

Firms flee rating agencies to avoid books scrutiny

4 months ago, 24 June 00:05

By: Otiato Guguyu

When Bank of Africa Kenya withdrew its commitment to be scrutinized and graded by South African firm Global Credit rating, their debt position was questioned.

GCR had watched as the lender’s long term rating of A-(KE) and short term rating of A1-(Ke) move from positive in 2012, stable in 2015 to negative in August 2016.

The lender withdrew from the ratings agency. Coincidentally, five months later, the bank announced that it will close 12 of its 42 retail branches, subject to approval from the Central Bank of Kenya.

The bank reported a profit of Sh10.4 million in 2016 then improved to Sh67 million last year. BoA says the withdrawal was part of wider efforts to cut costs and remove duplicity since the Group Holding Bank was already being rated.

“Bank of Africa Kenya withdrew from the GCR rating being a strategic move as its majority shareholder BMCE Bank of Africa is rated by international agencies. This is a commercial decision meant to avoid duplication of functions,” BoA said in a statement.

Unfortunately, BoA is in good company. Many Kenyan companies are no longer comfortable to let rating agencies pore through their books. Firms have resorted to avoid adverse ratings from the South African ratings agency.

A review of recent trends shows a damning trend of Kenyan companies opting to leave the agency as they face poor scores and their fortunes ultimately nosediving shortly after.

Over the last five years, 14 companies have withdrawn their ratings at GCR, some of which had been cited by the agency for poor outlook.

In fact, half of them quit in 2016 with 6 firms deciding they no longer want to have the review. Chase Bank, Bank of Africa Kenya, Fusion Capital Ltd, Industrial and Commercial Development Corporation (ICDC) and Shelter Afrique have all ceased to participate.

Cannon Assurance, Car and General, East African Cables, Kaluworks, KenolKobil, Mumias Sugar Company, Nakumatt Holdings, Real Insurance and Saham Assurance Company Kenya Limited have also left.

Media reports on GCR grading scores have been the closest indicators of troubles that have been hitting local firms, acting as a reliable thermometer to their fortunes and debt positions.

In December, Real People Investment Holdings, which issued a Sh1.6 billion bond in 2015 was downgraded by GCR over ‘strong possibility that the group will breach its Capital Adequacy Ratio debt covenant in the near term, and/or fail to meet existing debt obligations’.

“This negative rating action primarily reflects a reduction in the servicer’s financial strength assessment following GCR’s recent downgrade of Real People’s issuer rating to CCC (ZA) from BB+ (ZA),” said GCR.

The South African credit only microfinance subsequently netted a loss of Sh232 million for the half year ending September 30 compared to a loss of Sh199 million reported in the same period during the last financial year.

Athi River Mining, which is currently facing mounting debt pressures has opted to stay put. It will be reviewed by the ratings agency which will assess its books next month.

In January, ...
Read More


Category: business news

Suggested

Now
@CapitalFMNews - By: Kennedy Kangethe
KCB, NSE and Safaricom top corporate governance ranking

NAIROBI, Kenya, Oct 15 - KCB Group, Nairobi Securities Exchange (NSE), and Safaricom tied as the Top 3 companies with the best corporate governance Kenya breaking news | Kenya news today | ...

Category: business finance
8 hours ago, 08:12
@BusinessDaily - By: Brian Ngugi
DCI to probe Sh3bn cooking gas contracts

A third of the liquefied petroleum gas (LPG) cylinders supplied to Nock were defective. ...

Category: business news
2 hours ago, 13:41
@TheEastAfrican - By: Allan Olingo
Japan to fund only high-impact projects in Africa to save it from impending crisis

Tokyo to push for sound debt management by African governments. ...

Category: business news
7 hours ago, 09:36
@CapitalFMNews - By: Correspondent
Monday morning business brief

NAIROBI, Kenya, Oct 15 - The second urban dialogue on delivering the affordable housing agenda is expected to kick off in Nairobi today. The two-day forum Kenya breaking news | Kenya news today | ...

Category: business
6 hours ago, 10:23
@CapitalFMNews - By: Agence France Pres ...
Once mighty US retailer Sears files for bankruptcy

WASHINGTON, United States, Oct 15 - Sears, the venerable US chain that once dominated the retail sector but had been in decline since the advent of the Kenya breaking news | Kenya news today | ...

Category: business enterprise
18 minutes
@CapitalFMNews - By: Correspondent
Google announces Sh100m grant to train Kenyan farmers on digital skills

NAIROBI, Kenya, Oct 15 - Google in partnership with One Acre Fund will train 100,000 Kenyan smallholder farmers in digital skills through a Sh100 million Kenya breaking news | Kenya news today | ...

Category: business

@StandardMedia

Firms flee rating agencies to avoid books scrutiny

4 months ago, 24 June 00:05

By: Otiato Guguyu

When Bank of Africa Kenya withdrew its commitment to be scrutinized and graded by South African firm Global Credit rating, their debt position was questioned.

GCR had watched as the lender’s long term rating of A-(KE) and short term rating of A1-(Ke) move from positive in 2012, stable in 2015 to negative in August 2016.

The lender withdrew from the ratings agency. Coincidentally, five months later, the bank announced that it will close 12 of its 42 retail branches, subject to approval from the Central Bank of Kenya.

The bank reported a profit of Sh10.4 million in 2016 then improved to Sh67 million last year. BoA says the withdrawal was part of wider efforts to cut costs and remove duplicity since the Group Holding Bank was already being rated.

“Bank of Africa Kenya withdrew from the GCR rating being a strategic move as its majority shareholder BMCE Bank of Africa is rated by international agencies. This is a commercial decision meant to avoid duplication of functions,” BoA said in a statement.

Unfortunately, BoA is in good company. Many Kenyan companies are no longer comfortable to let rating agencies pore through their books. Firms have resorted to avoid adverse ratings from the South African ratings agency.

A review of recent trends shows a damning trend of Kenyan companies opting to leave the agency as they face poor scores and their fortunes ultimately nosediving shortly after.

Over the last five years, 14 companies have withdrawn their ratings at GCR, some of which had been cited by the agency for poor outlook.

In fact, half of them quit in 2016 with 6 firms deciding they no longer want to have the review. Chase Bank, Bank of Africa Kenya, Fusion Capital Ltd, Industrial and Commercial Development Corporation (ICDC) and Shelter Afrique have all ceased to participate.

Cannon Assurance, Car and General, East African Cables, Kaluworks, KenolKobil, Mumias Sugar Company, Nakumatt Holdings, Real Insurance and Saham Assurance Company Kenya Limited have also left.

Media reports on GCR grading scores have been the closest indicators of troubles that have been hitting local firms, acting as a reliable thermometer to their fortunes and debt positions.

In December, Real People Investment Holdings, which issued a Sh1.6 billion bond in 2015 was downgraded by GCR over ‘strong possibility that the group will breach its Capital Adequacy Ratio debt covenant in the near term, and/or fail to meet existing debt obligations’.

“This negative rating action primarily reflects a reduction in the servicer’s financial strength assessment following GCR’s recent downgrade of Real People’s issuer rating to CCC (ZA) from BB+ (ZA),” said GCR.

The South African credit only microfinance subsequently netted a loss of Sh232 million for the half year ending September 30 compared to a loss of Sh199 million reported in the same period during the last financial year.

Athi River Mining, which is currently facing mounting debt pressures has opted to stay put. It will be reviewed by the ratings agency which will assess its books next month.

In January, ...
Read More

Category: business news

Suggested

Now
@CapitalFMNews - By: Kennedy Kangethe
KCB, NSE and Safaricom top corporate governance ranking

NAIROBI, Kenya, Oct 15 - KCB Group, Nairobi Securities Exchange (NSE), and Safaricom tied as the Top 3 companies with the best corporate governance Kenya breaking news | Kenya news today | ...

Category: business finance
8 hours ago, 08:12
@BusinessDaily - By: Brian Ngugi
DCI to probe Sh3bn cooking gas contracts

A third of the liquefied petroleum gas (LPG) cylinders supplied to Nock were defective. ...

Category: business news
2 hours ago, 13:41
@TheEastAfrican - By: Allan Olingo
Japan to fund only high-impact projects in Africa to save it from impending crisis

Tokyo to push for sound debt management by African governments. ...

Category: business news
7 hours ago, 09:36
@CapitalFMNews - By: Correspondent
Monday morning business brief

NAIROBI, Kenya, Oct 15 - The second urban dialogue on delivering the affordable housing agenda is expected to kick off in Nairobi today. The two-day forum Kenya breaking news | Kenya news today | ...

Category: business
6 hours ago, 10:23
@CapitalFMNews - By: Agence France Pres ...
Once mighty US retailer Sears files for bankruptcy

WASHINGTON, United States, Oct 15 - Sears, the venerable US chain that once dominated the retail sector but had been in decline since the advent of the Kenya breaking news | Kenya news today | ...

Category: business enterprise
18 minutes
@CapitalFMNews - By: Correspondent
Google announces Sh100m grant to train Kenyan farmers on digital skills

NAIROBI, Kenya, Oct 15 - Google in partnership with One Acre Fund will train 100,000 Kenyan smallholder farmers in digital skills through a Sh100 million Kenya breaking news | Kenya news today | ...

Category: business
Our App