Standard & Poor’s Ratings Services has raised its long-term issuer credit and senior unsecured debt ratings on the African Development Bank (AfDB) to ‘AAA’ from ‘AA+’. Standard & Poor’s also raised its rating on the bank’s subordinated debt to ‘AA+’ from ‘AA-‘. The outlooks on the ratings are stable.

“The upgrades are primarily the consequence of a sustained improvement in AfDB’s risk-bearing capacity, including its provisions for losses and shareholders’ equity,” says sovereign analyst Larry Hays. “In addition, the embedded credit risk in the bank’s loan portfolio is being increasingly mitigated by its reduction in size, a growing percentage of loans in its more creditworthy member countries, and the prospect of a significant portion of its loans to the poorest members being repaid by donors under the Highly Indebted Poor Countries (HIPC) Initiative.”

Standard & Poor’s downgraded its long-term issuer credit and senior unsecured debt ratings on AfDB to ‘AA+’ from ‘AAA’ in 1995. Since that time, in addition to the improvements in AfDB’s financial profile, a series of reform has been implemented that has made AfDB a more-professional and better-managed institution. “More recently, especially in the aftermath of September 11, the continent of Africa has become a more pressing concern among nonregional countries,” Hays explains. “AfDB, including its ‘soft-loan windows’ (the African Development Fund and the Nigerian Trust Fund), is well placed to assist donor countries who want to increase their commitment to the alleviation of poverty and economic development of African countries. Collectively, all of these changes augur well for AfDB’s future nonregional shareholder support.”