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.
Infrastructure 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
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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: . IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: . 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 participated 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.