VIS Upholds ‘A-‘ Rating for U Microfinance Bank’s Tier-I Debt Instrument

Karachi, VIS Credit Rating Company Limited (VIS) has confirmed the continued stability of U Microfinance Bank Limited’s (UMBL) Basel 3 Compliant Tier-I debt instrument (TFC-II), maintaining a rating of ‘A-’. This assessment underscores the bank's robust credit quality and adequate protection factors, despite potential economic shifts.

According to VIS Credit Rating Company Limited, in 2022, UMBL successfully raised Rs 1.0 billion through the issuance of these additional Tier-I Term Finance Certificates (TFCs), which are unsecured, subordinated, and privately placed. Featuring a markup rate of 6-month KIBOR + 2.50%, these perpetual and non-cumulative debt instruments underscore the bank’s strategic financial management. The bank retains the option, with State Bank of Pakistan approval, to call these TFCs at par on any profit payment date after five years from the issuance, enhancing flexibility in its capital management strategy.

Furthermore, these instruments are structured to convert into a fixed number of the bank’s ordinary shares in the event of a Common Equity Tier-I trigger, prioritizing them above common shares but below other debt claims in terms of capital structure. This strategic financial tool plays a crucial role in reinforcing UMBL’s capital adequacy, aligning with broader regulatory and economic goals.