Investment bank JPMorgan Chase & Co. has upgraded its outlook on bonds issued by the African Export-Import Bank (Afreximbank), saying a sharp sell-off triggered by a recent credit rating downgrade has created renewed value for investors.
JP Morgan moved its recommendation on Afreximbank bonds to “overweight” from “underweight”, effectively signalling a buy, after prices fell following last week’s downgrade by Fitch Ratings.
Fitch cut Afreximbank’s rating to junk status, citing losses agreed on the bank’s exposure to Ghana, which is undergoing a sovereign debt restructuring. The agency argued that the hit suggested Afreximbank did not fully benefit from “preferred creditor status,” a protection typically afforded to multilateral development lenders during defaults.
Afreximbank strongly disputed the assessment, stating that the downgrade failed to reflect its Establishment Agreement, legal protections, and development mandate. The bank subsequently terminated its relationship with Fitch, after which the agency formally withdrew its rating.
In its note, JP Morgan said the market reaction had been excessive.
“We think that this sell-off has created more value in these bonds and made them attractive relative to benchmarks,” JP Morgan analysts said.
With Fitch no longer providing a rating, Moody’s remains the only major international ratings agency covering Afreximbank. Moody’s has not signalled any intention to follow Fitch’s downgrade, meaning Afreximbank bonds remain eligible for inclusion in JP Morgan’s investment-grade bond indices, a key benchmark for global investors.
JP Morgan analysts also said Afreximbank is likely to adjust its lending framework to reduce future exposure to sovereign debt restructurings, while noting continued political and shareholder support.
“Sovereigns should also remain supportive to Afrexim and keep giving it preferred treatment wherever they can,” the analysts added.
The episode has renewed scrutiny of how global credit rating agencies assess African multilateral lenders, and whether existing methodologies adequately capture their unique legal structures, shareholder backing, and development mandates.
