GCR Assigns InfraCredit a National Scale Rating of AAA(NG); Outlook Stable.

24 Jul 2017 In Rating Notifications

GCR Assigns InfraCredit a National Scale Rating of AAA(NG); Outlook Stable.

Lagos, 24 July 2017—Global Credit Ratings has accorded Infrastructure Credit Guarantee Company Limited (“InfraCredit” or “the company”) a first time, national scale long-term rating of AAA(NG); with the outlook accorded as Stable.  The rating is valid until February 2018.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit ratings based on the following key criteria:

The rating accorded to InfraCredit is based on an assessment of its envisioned business model, capital structure, financial projections and assumptions, and risk mitigation mechanisms. Therefore, a significant departure from the conceptualised archetype, and delays in or lack of implementation of the proposed operational framework and risk protection mechanisms, could impact negatively on the rating.

In particular, GurantCo’s participation in InfraCredit through provision of contingent capital, and technical support in key operational areas (credit and risk management), supports the rating. As the lead contingent capital provider, Guarantco will have a seat on the board of InfraCredit and also a representative on the Board Credit Committee (with a consent rights over certain credit decisions), monitoring rights and step-in rights (direct remediation) upon a drawing under the contingent capital facility. Hence the rating accorded to InfraCredit largely reflects the high investment grade ratings of InfraCredit’s sponsors and contingent capital providers. Specifically, GuarantCo has been accorded an international scale rating of ‘AA-’ by an internationally recognised rating agency, while other potential contingent capital providers are expected to have similar ratings from a recognised rating agency.

The profile of members of the interim board of directors (“board”) is considered strong, while the company is expected to have access to a selection of highly qualified and experienced board members from diverse professional fields going forward, based on the proposed final board composition.

Presently owned by Nigeria Sovereign Investment Authority (“NSIA”), InfraCredit is expected to have a diverse and strong ownership base (to comprise international development finance institutions (“DFIs”), and private institutional investors) in the near future. According to the draft Shareholders’ Agreement, the public sector’s stake in InfraCredit will be limited to a maximum of 25% once the new investors come on board.

The fact that credit guarantees to be issued will be capped at a multiple of 1x issued capital in the foreseeable future significantly supports the accorded rating.

A negative rating action may follow downgrades in the ratings of any of the contingent capital providers, a rise in leverage beyond the indicated limit, underperformance of the financial projections, and/or evidence of management’s inability to fully implement the proposed business plan and operational structure.

NATIONAL SCALE RATINGS HISTORY
Initial/last rating (July 2017)
Long term: AAA(NG)                       
Outlook: Stable                          
                                                           
ANALYTICAL CONTACTS
Primary Analyst                                         Committee Chairperson
Julius Adekeye                                           Dave King
+23 41 462 2545                                         .(JavaScript must be enabled to view this email address)
.(JavaScript must be enabled to view this email address)                     

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Glossary of Terms/ Ratios (February 2016)

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 validity of the rating is for 12 months, or as indicated by the applicable credit rating document.

The rating was solicited by, or on behalf of Infrastructure Credit Guarantee Company Limited, and therefore, GCR has been compensated for the provision of the rating. Infrastructure Credit Guarantee Company Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.

The credit rating above was disclosed to and contested by Infrastructure Credit Guarantee Company Limited and was amended following the provision of further material information by the entity.

The information received from Infrastructure Credit Guarantee Company Limited and other reliable third parties to accord the credit rating included the certificate of incorporation, business plan, information memorandum, capital structure, draft guarantee policy, draft investment policy, draft risk management policy, draft Shareholders’ Agreement, and the draft financial projections for 2017-2021. In addition, other information specific to the rated entity and/or industry was also received.

 

 

 

 

 

 

 

 

 

 

 

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.

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