Lagos, Nigeria, 14 May 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative Issue rating of BBB+(NG)(IR) to Accelerex SPV Plc’s proposed N6bn Series 1 Senior Unsecured Bonds. The Outlook on the rating is Stable.
|Rated Entity / Issue||Rating class||Rating scale||Rating||Outlook / Watch|
|N6bn Series 1 Senior Unsecured Bond||Long Term Issue||National||BBB+(NG)(IR)*||Stable Outlook|
*IR stands for Indicative Rating.
The Issuer, Accelerex SPV Plc, is a special purpose vehicle owned and sponsored by Global Accelerex Limited as a funding entity, solely for the purpose of raising finance for its Sponsor. The Issuer has filed an application with the Securities and Exchange Commission to issue bonds into the Nigerian capital market, under a N20bn Bond Issuance Programme (“the Programme”) and is in the process of raising an initial N6bn in Series 1 Senior Unsecured Bond Issuance. The Series 1 Bonds shall constitute direct, unconditional, senior, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves.
The Sponsor, Global Accelerex Limited, engages in the provision of electronic payment terminals and financial technology solutions in Nigeria, licenced by Central Bank of Nigeria. GCR recently affirmed the national scale long term Issuer rating of BBB+(NG) accorded to the Sponsor, underpinned by supportive operating environment for the Nigerian financial technology sector, as well as the Sponsor’s strong earnings progression and cash flow stability which has enabled moderate credit protection metrics.
The transaction mechanics entail the use of the proceeds of the Series 1 Bond Issuance to purchase the Bonds to be issued by the Sponsor under an Intercompany Bond Purchase Agreement (“IBPA”). The funds received under the IBPA will be applied by the Sponsor in the manner specified in the Series 1 Bonds Trust Deed.
Global Accelerex Limited, the Issuer and the Bond Trustee is entering into a covenant, pursuant to which the Sponsor absolutely, irrevocably and unconditionally undertakes to make punctual and full payment of all due financial obligations of the Issuer under the Programme. Specifically, the Sponsor (through the Deed of Covenant) undertakes that if the Issuer does not pay any of the due obligations under the Programme, it will immediately perform the payment obligations of the Issuer as if it were the primary obligor.
Given that Global Accelerex Limited offers timely and full coverage of all payments due to the bondholders, under the Series 1 Senior Unsecured Bonds through the Deed of Covenant, the Bonds bear the same default risk as its Sponsor and would reflect similar recovery prospects to senior unsecured creditors in the event of a default. As such, the long-term rating for the proposed Series 1 Bonds is equivalent to the Sponsor’s long term senior unsecured rating.
The indicative rating assumes that the conditions in the bond transaction documents will not change.
The Stable Outlook reflects GCR’s expectation that the successful issuance of the proposed bond would stimulate higher POS terminal trading and agent transaction volume, underpinning strong revenue growth of 30% over the next two years and sustainable cash flow. These should also see net debt to EBITDA register within 2x, and funds from operations to net debt ratio above 30%. While earnings margins are expected to remain within moderate levels, this could be adversely impacted by the rising inflationary pressure and foreign currency shortages within the Nigerian operating environment.
Negative rating action would be considered following materially adverse regulatory developments within the fintech sector, and a weakening in credit protection metrics of the Sponsor due to 1) Net debt to EBITDA rising above 2x, 2) EBITDA coverage of net interest reducing below 5x, and 3) Funds from operations to net debt ratio declining below 30%. Moreover, a positive rating migration is unlikely for the Sponsor in the short term, given its modest niche within the Nigerian financial sector. That said, a dominant market position within the POS terminal trading and financial inclusion agent network, while maintaining a strong credit profile could be positively considered.
|Primary analyst||Femi Atere||Credit Analyst|
|Lagos, Nigeria||femi@GCRratings.com||+234 1 9049462|
|Committee chair||Matthew Pirnie||Group Head of Ratings|
|Johannesburg, ZA||matthewp@GCRratings.com||+27 11 784 1771|
Related Criteria and Research
|Criteria for the GCR Ratings Framework, May 2019|
|Criteria for Rating Financial Services Companies, May 2019|
|GCR’s Nigeria Country Risk Score report, February 2021|
|GCR Ratings Scales, Symbols & Definitions, May 2019|
|Global Accelerex Limited Issuer rating report (2021)|
|GCR’s Nigerian Non-Bank Financial Institutions Sector Risk Score report, February 2021|
|Credit Risk||The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and interest when due.|
|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.|
|Refinancing||The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.|
|Short Term Rating||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 Accelerex SPV Plc, the Sponsor, and the Transaction Arranger. 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.
Accelerex SPV 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 Accelerex SPV Plc and other reliable third parties to accord the credit rating included:
- 2019 audited annual financial statement, and prior four years annual financial statements of the Sponsor;
- The Sponsor’s 8-month management accounts to 31 August 2020;
- Internal and/or external management reports;
- Draft Programme Trust Deed
- Draft Series 1 Pricing Supplements
- Draft Series 1 Trust Deed
- Intercompany Bond Purchase Agreement
- Deed of Covenant