Announcements Corporate Indicative Rating Actions Rating Alerts

GCR accords an Indicative BBB(NG)(IR) National Scale Rating to Daraju Industries Funding Plc’s proposed N10bn Series 1 Senior Unsecured Bond Issue.

Lagos, Nigeria, 19 April 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative rating of BBB(NG)(IR) to Daraju Industries Funding Plc’s proposed N10bn Series 1 Senior Unsecured Bonds. The Outlook on the rating is Stable.

Rated Entity / Issue Rating class Rating scale Rating Outlook / Watch
N10bn Series 1 Bond Long Term Issue National BBB(NG)(IR)* Stable

*IR stands for Indicative Rating.

Rating Rationale

The Issuer, Daraju Industries Funding Plc, is a special purpose vehicle incorporated for the purpose of raising debt through the issuance of Bonds in order to subscribe to the Notes to be issued by the Sponsor, pursuant to a Master Notes Subscription Agreement. GCR recently accorded a long-term rating of BBB(NG) to the Sponsor, Daraju Industries Limited, on the back of its established market niche and diversified product portfolio which have facilitated stable earnings and cash flows over the cycle.

The Issuer is in the process of registering a N15bn Bond Issuance Programme (“the Programme”) with Securities and Exchange Commission and expects to issue up to N10bn in Series 1 under the Programme, with a five-year tenor. The Bonds shall constitute direct, unconditional, senior and unsecured obligations of the Issuer, backed by the irrevocable and unconditional undertaking of the Sponsor and shall rank pari passu without any preference among themselves and all unsecured creditors of the Issuer and at least pari passu with the claims of all holders of both present and future unsecured and unsubordinated obligations of the Issuer. The bond net proceeds will be utilised for refinancing of the existing loans of the Sponsor. GCR expects that the Sponsor will continue to generate robust cash flows sufficient to meet its Bond obligations and continue to demonstrate financial flexibility.

Given that the Sponsor offers timely and full coverage of all payments due to the bondholders, under the Series 1 Senior Unsecured Bonds through the Deed of Undertaking, 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 Series 1 Bonds is equivalent to the Sponsor’s long term senior unsecured rating. Accordingly, any change in the Sponsor’s long-term credit rating would impact the issue rating.

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

Outlook Statement

The Stable Outlook reflects GCR’s expectations that the Sponsor will continue to generate robust cash flows and operate profitably over the outlook period. Along with the proposed bond issue, this will help to reduce the high and short dated debt profile.

Rating Triggers

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

Positive rating action could emanate from a meaningful improvement in the debt maturity profile. Attaining or exceeding earnings targets should also ensure improved cash flows and a reduction in the overall quantum of debt. The rating could come under pressure if the company is unable to refinance its short-term debt. Further, persistent liquidity pressure would likely mean that gearing remains high and debt service coverage relatively weak.

Analytical Contacts

Primary analyst Samuel Popoola Analyst
Lagos, Nigeria Samuel@GCRratings.com +234 1 904 9462
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 Corporate Entities, May 2019
GCR’s Nigeria Country Risk Score report, February 2021
GCR’s FMCG Sector Risk Score report, February 2021
Daraju Industries Limited Issuer rating report, March 2021

Ratings History

Daraju Industries Funding Plc’s Series 1 Bond

Rating class Review Rating scale Rating Outlook/Watch Date
N10bn Series 1 Bond Initial/new National BBB(NG) Stable Outlook April 2021

Risk Score Summary

Rating Components & Factors Risk scores
Operating environment 6.75
Country risk score 3.75
Sector risk score 3.00
Business profile 0.50
Competitive position 0.50
Management and governance 0.00
Financial profile (1.00)
Earnings performance 1.00
Leverage and Cash flow (1.50)
Liquidity (0.50)
Comparative profile 0.00
Group support 0.00
Peer analysis 0.00
Total Score 6.25

Glossary

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 Daraju Industries Funding 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.

Daraju Industries Funding 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 Daraju Industries Funding Plc, the Sponsor and other reliable third parties to accord the credit rating included:

  • 2019 audited annual financial statement, and prior four years annual financial statements;
  • 2020 full year management accounts;
  • Internal and/or external management reports;
  • Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties;
  • Information specific to the rated entity and/or industry was also received;
  • Draft Series 1 Trust Deed
  • Draft Programme Trust Deed
  • Draft Shelf Prospectus
  • Draft Master Notes Subscription Agreement
  • Draft Deed of Undertaking
image_pdfPDF View


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://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. 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 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 © 2021 GCR INFORMATION PUBLISHED BY GCR 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. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these 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 in each credit rating report and/or rating notification 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 in each credit rating report and/or rating notification 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.