JPMorgan Upgrades Afreximbank Bonds to ‘Overweight’ Amid Rising Restructuring Risks

 Global Markets ,June 18, 2025 — : JPMorgan on Tuesday raised its recommendation on Afreximbank bonds to ‘overweight’, citing attractive valuations following a recent downgrade by Fitch Ratings. The move comes amid growing speculation that the African trade and development bank may be drawn into sovereign debt restructuring processes involving defaulted nations such as Ghana and Zambia.

Fitch earlier this month downgraded Afreximbank’s credit rating to BBB-, just a notch above junk status, and assigned a negative outlook. The agency flagged elevated credit risks, weak risk-management practices, and a non-performing loan (NPL) ratio of 7.1% at the close of 2024 as key concerns.

Afreximbank, a multilateral lender, maintains that it enjoys preferred creditor status, which traditionally shields its loans from participation in sovereign debt restructurings. This claim is particularly significant in the context of the bank's exposures to Ghana, Zambia, and Malawi—countries that have either defaulted or are undergoing fiscal distress.

However, JPMorgan analysts note that the probability of the bank becoming involved in future restructuring efforts has increased.

“If Afreximbank is ultimately drawn into a restructuring process — a scenario that appears increasingly likely — there is a risk that Fitch could issue a further downgrade, potentially pushing the bank’s rating into high-yield (HY) territory,” wrote Konstantin Rozantsev, strategist at JPMorgan. “Such a move could trigger forced bond selling by investors constrained to hold investment-grade debt.”

Despite these risks, JPMorgan sees value in Afreximbank’s bonds maturing in 2029 and 2031, which are currently trading at a spread of 75 basis points above similarly rated BB-BBB bonds. The bank argues that this pricing offers sufficient compensation for the possibility of further adverse rating actions.

The investment bank’s upgraded stance reflects both a recalibration of risk and an opportunistic view on pricing dislocations in the market following Fitch’s downgrade. Investors are now watching closely to see how debt negotiations in Africa unfold and whether Afreximbank’s status as a preferred creditor will ultimately be upheld.