EADB has recently been assigned a first-time rating of Ba1 by Moody’s Investors Service to the long-term foreign currency debt of the East African Development Bank (EADB). The rating outlook is stable. The rating was assigned on June 28, 2013. Commenting on the news, EADB Director General, Vivienne Yeda, said the positive rating was an affirmation of the Bank’s creditworthiness.
“It will enhance EADB’s capacity to mobilise resources for the region and expand its business,” said Ms. Yeda. The positive rating solidifies EADB’s position as the apex financial institution of the East African Community. It is an independent and resounding affirmation that EADB is the strongest East African DFI. The landmark rating provides a foundation for the Bank to raise low-cost, long-term financing over time in significant amounts to support productive investments in East African infrastructure, industry and other projects that will boost the region’s economic development and integration.
The Bank benefits not only from the strong and unwavering support of its multiple member states but also of its key development partners that include the triple-A rated African Development Bank. The Bank is financially sound and is poised to play a greater role in the region with the strong support of the East African Community. Moody’s rating rationale cites the credit strengths of the Bank, specifically “improved governance and risk-management policies and capabilities, combined with a very strong liquidity position compared to similarly rated supra-nationals, supported by access to diversified and stable sources of funding. The ongoing improvements associated with the EADB’s strong liquidity position have strengthened the Bank’s resilience to shocks, putting the bank in a favourable position in light of its expected portfolio
The EADB registered a risk-weighted capital adequacy ratio of 77% at year-end 2012, which exceeds the ratio of most A-rated commercial banks as well as the Basel II ratio of 8%.The risk asset ratio was 70% in 2012. Moody’s also notes favorably the designation by the East African Community of EADB as the host for the East African Community Development Fund. The Moody’s rating of Ba1 for the Bank is just one notch below an investment grade rating and three notches (a full rating category) above the ratings of the highest rated member states (Kenya B1).
The financing implications of Moody’s rating for EADB are quite clear. Based on recent Eurobond issues by African sovereign and supranational borrowers, EADB expects to be able to raise funds at significant cost savings relative to the cost of funds of other East African borrowers. EADB believes that its current rating will enable it finance businesses throughout the East African Community on more attractive terms as its lower cost of funds in local and international capital markets on a rated basis can be passed along to its borrowers.