CREDIT rating agency, Fitch Ratings has knocked the Development Bank of Namibia’s creditworthiness down to the last notch before investors start seeing the bank as a high lending risk.
The rating agency says the DBN’s outlook is stable, however, and should there be an improvement in the state’s debt affairs, an upward revision is possible.
Owned 100% by the state through the Ministry of Finance, the DBN is funded by state money and funds from other development agencies.
Last month Fitch downgraded Namibia to a rating of BB-, saying the country was on a negative debt trajectory.
Both debt and interest rates on the involved debt were considered too high, and the local economy might not be able to expand to sustain this debt.
Fitch’s only option was therefore to lower the country’s strength in terms of is ability to repay its debts to the last category before being labelled it high risk.
“DBN’s BB- long-term IDR is equalised with that of Namibia, reflecting a moderate probability of support from the Namibian authorities. The stable outlook on the DBN’s long-term IDR mirrors that on the sovereign rating,” Fitch says.
“The rating is aligned with Namibia’s national rating based on potential support, and reflects the bank’s creditworthiness relative to that of issuers in South Africa and Namibia.
“The stable outlook reflects that on the sovereign’s national rating,” the rating agency says.
It says the DBN is Namibia’s flagship policy bank and contributes to the country’s economic growth and social development.
Its strategy is aligned with national development objectives and is highly influenced by Namibian government policy, with oversight from its shareholder representative, the finance ministry.
The DBN focuses on financing infrastructure, developmental and large industrial projects in strategically important sectors, and, to a lesser degree, financing small and medium enterprises.
According to the DBNs recent financial statements, the balance sheet is reaching N$10 billion, with over N$5 billion sitting as credit facilities.
The government guarantees all the DBN’s borrowing, and at the end of the 2021 financial year, these guarantees covered 95% of all borrowing, additional to its own debt.
According to Fitch, “the DBN’s ratings could be upgraded if Namibia’s sovereign ratings are upgraded”.
Additionally, should the DBN sell part of its shareholding, it could lead to a better credit rating.
Should the proportion of non-guaranteed funding increase materially, particularly if Fitch believes this to be indicative of a weakening in its policy role, or should the government ownership reduce significantly, which Fitch views as unlikely, this could cause the DBN to be downgraded, the agency says.
Atempts to reach DBN’s executive proved futile by the time of going to print.
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