Lagos, Nigeria, 30 March 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative rating of AAA(NG)(IR)) to Dangote Cement Plc’s proposed N300bn Series 1 (Tranche A–C) Senior Unsecured Bonds. The Outlook on the rating is Stable.
|Rated Entity / Issue||Rating class||Rating scale||Rating||Outlook / Watch|
|Up to N300bn Series 1 (Tranche A –C)||Long Term Issue||National||AAA(NG)(IR)*||Stable Outlook|
*IR stands for Indicative Rating.
The Issuer, Dangote Cement Plc (“DCP”) is Africa’s leading integrated cement manufacturer, with a combined installed capacity of 45.6 million tonnes per annum across ten countries. GCR recently upgraded the Issuer’s long term rating to AAA(NG), underpinned by its strong competitive position, very solid earnings, robust cash flows and moderate gearing metrics.
DCP is in the process of registering a N300bn Multi-Instrument Bond Programme (“the Programme”) with Securities and Exchange Commission. Up to N300bn is expected to be issued in Series 1 Bond Issue under the Programme, and split into three Tranches (Tranche A, B and C), with tenor of three years, five years and seven years respectively. The Bonds shall constitute direct, unconditional, senior, unsubordinated and unsecured obligations of the Issuer. The bond net proceeds will be utilised for Nigerian expansion projects, refinancing of short term debts and working capital funding. Notwithstanding the amount raised under the Programme, GCR expects the Group to continue to demonstrate strong financial flexibility.
Being senior unsecured debt, the proposed Series 1 (Tranche A-C) 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 notes will not change and will receive regulatory approval.
A national scale rating upgrade is not possible as DCP’s long-term and short-term ratings are the highest possible ratings on GCR’s national rating scale. However, downward ratings pressure could arise from protracted earnings pressure or greater competition emerging from major international cement manufacturers. The aggressive dividend policy could result in materially higher than anticipated leverage and adversely impact GCR’s view of liquidity.
|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 Corporate Entities, May 2019|
|GCR’s Nigeria Country Risk Score report, February 2021|
|Dangote Cement Plc Issuer rating report (2016-20)|
|GCR’s Primary Manufacturing Sector Risk Score report, February 2021|
Dangote Cement Plc
|Rating class||Review||Rating scale||Rating||Outlook/Watch||Date|
|Long term Issuer||Initial||National||AA+(NG)||Stable Outlook||September 2016|
|Short Term Issuer||Initial||National||A1+(NG)|
|Long term Issuer||Last||National||AA+(NG)||Stable Outlook||December 2020|
|Short Term Issuer||Last||National||A1+(NG)|
RISK SCORE SUMMARY
|Rating Components and Factors||Risk scores|
|Country risk score||3.50|
|Sector risk score||1.75|
|Management and governance||0.00|
|Leverage and Capital Structure||2.50|
|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 Dangote Cement 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.
Dangote Cement 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 Dangote Cement Plc and other reliable third parties to accord the credit rating included:
- 2019 audited annual financial statement, and prior four years annual financial statements;
- 9-month management accounts to 30 September 2020;
- 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;
- The Shelf Prospectus
- Draft Series 1 (Tranche A-C) Pricing Supplements
- Draft Series 1 Tranche (A-C) Trust Deeds