GCR accords an indicative rating of AAA(NG)(sf) to GEL Utility Funding SPV Plc’s Series 1 Bonds

21 Dec 2018 In Rating Notifications

GCR accords an indicative rating of AAA(NG)(sf) to GEL Utility Funding SPV Plc’s Series 1 Bonds

Lagos, 21 December, 2018—Global Credit Ratings (“GCR”) has accorded an indicative public long-term credit rating of AAA(NG)(sf) to GEL Utility Funding SPV Plc’s (“GEL-SPV”, or “the Issuer”) proposed Series 1 (up to N15.5bn) Senior Guaranteed Fixed Rate Bonds Issue (“the Bonds” or “Series 1 Bonds”); with an outlook accorded as Stable. The indicative rating accorded to the Series 1 Bonds to be issued by the Issuer under its N50bn Medium-Term Note Issuance Programme (“MTNP” or “the Programme”) relates to timely payment of interest and principal, as such, the Programme is not rated; only the Bonds are.  The indicative rating will expire in March 2019. The Bonds are anticipated to be issued during the first quarter of 2019. The final rating will be accorded upon receipt of satisfactory final signed executed transaction documents and final signed legal opinion.


RATING RATIONALE OF THE ISSUE

GEL-SPV was incorporated as a special purpose vehicle in September 2018, for the purpose of sourcing funds from the capital market and advancing same to the Sponsor and any other Co-Obligor(s). Bond proceeds will be utilised mainly for debt refinancing and capital expenditure. The N50bn MTNP is backed by a resolution of the Board of Directors (“Board”) of the Issuer, which authorises the Issuer to issue the Bonds in series, different forms, and under different terms and conditions as may be deemed fit by the Board. The Series 1 Guaranteed Fixed Rate Bonds will have a tenor of 15 years and will constitute direct, senior, unconditional and unsubordinated obligations of the Issuer. All payment obligations under the Issue (except otherwise provided for by applicable laws) rank equal with all other present or future unsubordinated payment obligations of both the Issuer and the Guarantor.

I

nfrastructure Credit Guarantee Company Limited (“InfraCredit”) and the Trustee (acting on behalf of the bondholders) have entered into a guarantee agreement pursuant to which InfraCredit, in its capacity as Guarantor, irrevocably and unconditionally guarantees the punctual and full (100%) settlement of i) scheduled interest payments ii) scheduled principal due and payable by the Issuer under the Series 1 Bonds iii) and any interest accrued but unpaid in respect of the bond obligations. GCR affirmed InfraCredit’s long term national scale rating of AAA(NG) in June 2018.

The Guarantee shall serve as a continuing security, and will be in full force and effect until all payments under the Series 1 Bonds have been fully discharged, and cannot be accelerated, except, the Guarantor in its sole discretion elects to do so. Accordingly, upon the occurrence of an Event of Default, the Guarantor will continue to be liable to make interest and principal payments on the Series 1 Bonds on the due date in accordance with the repayment schedule, acting as primary obligor.

The ‘AAA(NG)(sf)’ indicative, public, national scale long term credit rating accorded to the Series 1 Guaranteed Fixed Rate Bonds is fully supported by the Guarantor’s credit rating, as the InfraCredit Guarantee offers timely and a 100% coverage of all payments due to the bondholders, under the Series 1 Bonds. In addition, GCR has received a draft legal opinion which confirms that the Guarantee is irrevocable, unconditional and enforceable in line with its terms. The appointed Account Bank has a short-term national scale rating of A1+(NG) by GCR.  A downgrade in the rating of the Guarantor and/or relevant risk presenting entities will affect the rating of the Series 1 Bonds.

In accordance with the Series 1 Trust Deed, the net proceeds of the Series 1 Bonds will be passed through and/or advanced to Gel Utility Limited (“GELUL”), thus making it the transaction Sponsor. In this regard, GELUL as the Co-obligor shall have a joint and several obligation to repay the aggregate principal amount outstanding and coupon payable on the Series 1 Bonds. Accordingly, the primary source of repayment of the bond will be GELUL’s operating cash flow. GELUL is engaged in the provision of dedicated electric power supply, including generation, distribution and other related services. It owns and operates an 84 Megawatt off-grid gas-fired electric power generation facility in Port-Harcourt, Nigeria. GELUL has displayed strong cash generation capacity over the review period, supported by the off-grid captive power generation model. GCR accorded a first time long-term unsecured national scale Issuer rating of BBB+(NG) to GELUL in December 2018.


NATIONAL SCALE RATINGS HISTORY
Asset Class Indicative Rating Long term Rating Short term Rating Rating Outlook
Guaranteed Infrastructure Bond 19 December 2018 AAA(NG)(sf) n.a Stable

ANALYTICAL CONTACTS


Primary Analyst
Adekemi Adebambo
Lagos
+23 41 904 9462-3
.(JavaScript must be enabled to view this email address)


Committee Chairperson
Dave King
Chairman

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

- Global Master Criteria for Rating Corporate Entities (February 2018)
- Global Structured Finance Rating Criteria (September 2018)
- Global Structurally Enhanced Corporate Bonds Rating Criteria (November 2018)
- Gel Utility Limited Rating Report (December 2018)
- Infrastructure Credit Guarantee Company Limited Rating Report (June 2018)


RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.


SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the indicative rating will expire in March 2019.

The Issuer and the Arrangers parti cipated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating has been disclosed to the Issuer without contestation from the Issuer.

The ratings above were solicited by the Issuer of the Transaction, GCR has been compensated for the provision of the rating.

The information received from the Arranger, Guarantor and other reliable third parties to accord the bond rating included: Draft Programme Prospectus, Draft Series 1 Pricing Supplement, GEL-SPV Memorandum and Articles of Association, Draft Programme Trust Deed, Draft Series 1 Trust Deed, Draft Deed of Guarantee, Draft Recourse Agreement, Draft Account Bank Agreement and Draft Legal Opinion from Templars.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES.  GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE

.

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2013 Global Credit Rating Company Limited. THE INFORMATION CONTAINED HEREIN MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED , IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. The ratings were solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR has been compensated for the provision of the ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information. GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.

Click on logo below to view more information about Global Credit Ratings Africa

Recent Rating Reports

05 Dec 2018: United Bank for Africa

05 Dec 2018: C&I Leasing Plc

05 Dec 2018: Nigeria Mortgage Refinance Company Plc

05 Dec 2018: Lafarge Africa Plc

05 Dec 2018: Gombe State Government of Nigeria

05 Dec 2018: Transcorp Hotels Plc

05 Dec 2018: Fidson Healthcare Plc

05 Dec 2018: Union Bank of Nigeria Plc

05 Dec 2018: First Bank of Nigeria Limited

05 Dec 2018: Stanbic IBTC Bank PLC

Purchase Rating Reports

Parties interested in purchasing individual or sectoral rating reports and/or bulletins from Global Credit Rating Company Limited are kindly requested to contact us on the following telephone numbers or email address.

Telephone:(+2341) 904 9462-3, 904 9466, 0805 615 8393, 0803 352 7871

Email: bisi@warltd.com

Email: tunde@globalratings.net

Recent Bulletin Releases
Rating Sectors
Credit Ratings

For a full list of Credit Ratings performed by Global Credit Ratings Company Limited please click here