Lagos Nigeria, 9 March 2020 — Global Credit Ratings has accorded an indicative public long-term credit rating of ‘AA+(NG)’ to Dangote Cement Plc’s proposed N100bn Series 1 Senior Unsecured Fixed Rate Bonds, with the Outlook accorded as Stable. The indicative bond rating expires in June 2020.
Global Credit Ratings (“GCR”) has accorded the above credit rating to Dangote Cement Plc’s proposed Series 1 Bonds based on the following key criteria:
Dangote Cement Plc (“the Issuer” or “Dangote”) registered a N300bn Debt Issuance Programme with Securities and Exchange Commission in October 2017, and plans to raise an initial N100bn under Series 1 Bond Issuance. However, the Issuer may elect to upsize the issue subject to market demand. The net proceeds shall be utilised for capacity expansion project, export terminal project and refinancing shareholder loan. The Series 1 Bonds shall have a legal maturity tenor of five years with expected maturity in 2025. The 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 Issuer is Africa’s leading integrated cement manufacturer, with a combined installed capacity of 45.6 million tonnes per annum across ten countries. Nevertheless, its geographical spread is counterbalanced by single market concentration, with Nigeria accounting for 88% of group EBITDA and 64% of capacity at FY19. GCR affirmed the Issuer’s long term rating at ‘AA+(NG)’ with a Stable outlook in January 2020. The rating reflects Dangote’s substantial production capacity, its extensive distribution network, significant scale economies and position as the largest corporate on The Nigerian Stock Exchange.
Dangote reports strong cash generation which peaked at N392.3bn in FY19, supporting operating cash flow coverage of total debt of 108% (FY18: 98%), despite ongoing expansion related working capital absorptions. The Issuer’s liquidity and capital structure are also supported by longstanding relationships with several domestic and international banks, N32bn in unutilised committed facilities currently on hand, and will be enhanced by the planned N300bn Bond Programme.
Gearing metrics remain moderate at FY19, with net gearing reported at 27%, and net debt to EBITDA at 62%. However, this could escalate following successful issuance of the proposed Series 1 Bonds.
The Programme Trust Deed does not offer Bondholders any security over assets but does feature a negative pledge and other covenants to protect the interest of Bondholders.
As the Series 1 Bonds are direct, unconditional, senior, unsecured and unsubordinated obligations of the Issuer, the Bonds will bear the same rating as the Issuer, and any change in the rating assigned to the Issuer will directly affect the Bond rating.
The indicative rating accorded to the Series 1 Bonds relates to ultimate payment of principal and interest (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity). The final rating will be accorded upon receipt of satisfactorily signed and executed transaction documents.
NATIONAL SCALE RATINGS HISTORY
Initial/last rating (March 2020)
Series 1 Senior Unsecured Bonds: AA+(NG)
Rating outlook: Stable
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018
Dangote Cement Plc’s Issuer rating report, 2016-19
Glossary of terms/ratios, February 2018.
RATING LIMITATIONS AND DISCLAIMERS
SALIENT FEATURES 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; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the indicative Bond rating expires in June 2020
Dangote Cement Plc and the Issuing Houses 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 indicative Bond rating has been disclosed to Issuer.
The information received from the Issuer, the lead Issuing House and other reliable third parties to accord the Bond rating included: Executed Shelf Prospectus, Executed Programme Trust Deed, Draft Series 1 Pricing Supplements, as well as Draft Series 1 Trust Deeds.
The rating above was solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the rating.