Announcements Corporate Indicative Rating Actions Rating Alerts

GCR accords an Indicative Rating to Ardova Plc’s proposed up to N22bn Series 1 (Tranches A & B) Senior Unsecured Bond Issue

Rating Action

Lagos, Nigeria, 24 August 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative rating of A-(NG)(IR) to Ardova Plc’s proposed up to N22bn Series 1 (Tranches A & B) Senior Unsecured Bonds. The Outlook on the rating is Stable.

Rated Entity / Issue

Rating class

Rating scale

Rating

Outlook / Watch

Series 1 Tranche A Bond

Long Term Issue

National

A-(NG)(IR)*

Stable

Series 1 Tranche B Bond

Long Term Issue

National

A-(NG)(IR)*

Stable

*IR stands for Indicative Rating.

Rating Rationale

The Issuer, Ardova Plc (“Ardova” or “the Issuer”) is a leading player in the Nigerian oil and gas downstream sector, whose competitive position is underpinned by its integration along the value chain, solid earnings performance through the cycle and moderately strong credit protection metrics and capital structure. GCR recently affirmed the national scale long-term rating of A-(NG) assigned to the Issuer.

Ardova is in the process of registering a N60bn Bond Issuance Programme (“the Programme”) with Securities and Exchange Commission and expects to issue up to N22bn in Series 1 under the Programme. This will likely be through two distinct Tranches (A & B) with identical features except for their respective size and maturity dates. The amount for each of the two Tranches will be allocated upon completion of book-building. The Tranche A Bonds will have a seven-year maturity, while Tranche B, 10-year. The Coupon Payments will commence from the Issue Date and be payable semi-annually in arrears up to and including the Maturity Date. Principal Repayment on both Tranches will be made on an amortised basis on each Coupon Payment Date as from 2023 following an 18-month Principal moratorium period.

The Series 1 Bonds (Tranches A & B) will be senior, direct, unconditional, and unsecured obligations of the Issuer. Being senior unsecured debt, the proposed Series 1 (Tranches A & B) Bonds will rank pari passu with all other senior unsecured creditors. As such, the Bonds will bear the same national scale long term rating as that accorded to the Issuer. Accordingly, any change in the Issuer’s long-term rating would impact the Bond rating.

The indicative rating assumes that the conditions in the Bonds will not change and will receive regulatory approval.

Outlook Statement

The Stable Outlook reflects GCR’s expectations that the Issuer will sustain sound earnings over the rating horizon, which should cushion the impact of the anticipated increase in debt on leverage metrics. We also envisage that the intermediate liquidity assessment will continue to be supported by good operating cash flows and the Issuer’s strong relationships with lenders.

Rating Triggers

Given that the indicative rating is intrinsically linked to the Issuer’s long-term rating, any change to the corporate rating assigned to Ardova will directly affect the Bond rating.

Analytical Contacts

Primary analyst

Samuel Popoola

Credit Analyst

Lagos, Nigeria

Samuel@GCRratings.com

+234 1 904 9462

     

Committee chair

Eyal Shevel

Sector Head: Corporate and Public Sector

Johannesburg, ZA

Shevel@GCRratings.com

+27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019

Criteria for Rating Corporate Entities, May 2019

GCR Nigeria Country Risk Score report, February 2021

GCR Nigeria Corporate Sector Risk Scores report, February 2021

Ardova Plc’s rating reports, 2016-21

 

Ratings History

Ardova Plc’s Series 1 (Tranches A & B) Senior Unsecured Bond

Rating class

Review

Rating scale

Rating

Outlook/Watch

Date

Long term Issue

Initial/last

National

A-(NG)(IR)

Stable

August 2021

 

Glossary

Debt

An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.

Indicative Rating

An indicative Rating is denoted by an ‘IR’ suffix to indicate that a credit rating has been accorded based on review of final draft documentation and expectations regarding final documentation.

Issuer Ratings

See GCR Rating Scales, Symbols and Definitions.

Issuer

The party indebted or the person making repayments for its borrowings.

Leverage

With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.

Liquidity

The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.

Long Term Rating

See GCR Rating Scales, Symbols and Definitions.

Maturity

The length of time between the issue of a bond or other security and the date on which it becomes payable in full.

Rating Horizon

The rating outlook period

Rating Outlook

See GCR Rating Scales, Symbols and Definitions.

 

SALIENT POINTS OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating process 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; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to Ardova Plc. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

Ardova Plc participated in the rating process via tele-conferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Ardova Plc and other reliable third parties to accord the credit rating included:

  • Draft Series 1 Tranche A Trust Deed
  • Draft Series 1 Tranche B Trust Deed
  • Draft Programme Trust Deed
  • Draft Shelf Prospectus
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