Afreximbank says Fitch’s negative outlook hinged on ‘erroneous’ view

NAIROBI, June 10 (Reuters) – Afreximbank said on Tuesday the decision by Fitch ratings agency to put it on a negative outlook last week was based on a wrong interpretation of its founding treaty signed by its member states.

Fitch downgraded Cairo-based Afreximbank’s credit rating to BBB-, one notch above junk ratings, from BBB, citing high credit risks and weak risk management policies. It also placed it on negative watch, effectively attaching another downgrade warning.

“Afreximbank would like to reaffirm that it is not participating in debt restructuring negotiations related to any of its member countries. To do so would be inconsistent with the Bank establishment treaty,” the lender said in a statement.

“Fitch’s ‘negative outlook’ decision… is hinged on the erroneous view, in some quarters, that the treaty establishing Afreximbank, executed by its 53 participating African states, can be violated by the Bank without consequences.”

The bank, which is owned by African governments and private investors, is viewed by many as an important continental financial institution, providing much-needed trade finance and other financing including during the COVID-19 pandemic.

The African Union has also criticised Fitch’s decision on Afreximbank’s rating and called for a review. Fitch has defended the decision, saying its ratings criteria applies to all supra-national institutions.

The row over the rating, which is a key factor in the cost of credit for a financial institution, comes as Afreximbank seeks to protect its loans from restructuring in Ghana, Zambia and Malawi, saying that as a multilateral lender it has preferred creditor status.