Announcements Corporate Indicative Rating Actions Rating Alerts

GCR accords an Indicative Rating to LFZC Funding SPV Plc’s N10bn Series 1 Senior Guaranteed Bond Issue, Outlook Stable.

Lagos, Nigeria, 10 August 2021 – GCR Ratings (“GCR”) has assigned a national scale long term indicative Issue rating of AAA(NG)(IR)) to LFZC Funding SPV Plc’s N10bn Series 1 Senior Guaranteed Bond, with the Outlook accorded as Stable. The indicative rating will expire on the sooner of 30 September 2021 or the issuance date of the Bonds.

Rated Issue Rating class Rating scale Rating Outlook
N10bn Series 1 Senior Guaranteed Bonds Long Term Issue National AAA(NG)(IR)* Stable Outlook

*IR stands for Indicative Rating.

Rating Rationale

The Issuer, LFZC Funding SPV Plc, is a special purpose vehicle sponsored by Lagos Free Zone Company (“the Sponsor” or “Co-Obligor”) as a funding entity, solely for the purpose of raising finance for its Sponsor. The Issuer has no business operation other than borrowing and passing through, as well as receiving funds from its Sponsor. The Sponsor engages in the development and management of Lagos Free Zone and leasing of the developed land to enterprises registered within the Zone. Its ultimate parent company is Tolaram Group Inc, a global conglomerate founded in 1948 and headquartered in Singapore, with operation spanning across Europe, Asia and Africa.

LFZC Funding SPV Plc has filed an application with the Securities and Exchange Commission to issue bonds into the Nigerian capital market under a N50bn Bond Issuance Programme (“BIP”) and is in the process of raising an initial N10bn in Series 1 Senior Guaranteed Bond Issue under the BIP. The Series 1 Bonds shall constitute direct, unconditional, guaranteed, and unsubordinated obligations of the Issuer and the Co-Obligor and shall at all times rank pari passu without preference among themselves.

Infrastructure Credit Guarantee Company Limited (“the Guarantor” or “InfraCredit”) has agreed to provide an irrevocable and unconditional guarantee in favour of the Guarantee Trustee for and on behalf of the Series 1 Bondholders to guarantee the timely performance of the obligations of the Issuer under the Series 1 Bond Issue. As such, the payment obligations of the Issuer and the Co-Obligor in respect of the Series 1 Bonds, and of the Guarantor under a Deed of Guarantee shall, save for such exceptions as may be provided by applicable law, at all times rank at least pari passu with all other unsecured unsubordinated indebtedness and monetary obligations of the Issuer, the Co-Obligor and the Guarantor respectively, both present and future.

The Guarantor and the Guarantee Trustees are entering into a guarantee agreement pursuant to which InfraCredit, in its capacity as Guarantor, shall guarantee the timely payment of 100% of both principal repayment and coupon payments regarding the Series 1 Bonds. The Legal opinion provided to GCR indicates that the Guarantee constitutes a legal, valid, binding and enforceable obligation of the Guarantor.

Under the Guarantee, if at ten (10) business days prior to a payment date, the payment account has not been funded by the Issuer and the Co-Obligor, the Guarantee Trustees are required to issue a Demand Notice to the Guarantor, and InfraCredit is required to fund the payment account with the due amount by the payment date to ensure bondholders are paid. The Guarantee will be in force until all payment obligations under the Series 1 Bonds have been fully discharged. InfraCredit is rated ‘AAA(NG)’ by GCR Ratings with a Stable Outlook. The rating is underpinned by the uniqueness of InfraCredit’s operations as a credit guarantee provider, its strong capitalisation, liquidity, and asset quality position, albeit counterbalanced by its self-regulated status.

Given that InfraCredit offers timely and full coverage of all payments due to the bondholders under the Series 1 Bonds through the Deed of Guarantee, the Bonds bear the same default risk as InfraCredit and would reflect similar recovery prospects to senior unsecured creditors in the event of default. As such, the national scale long-term indicative rating of the Series 1 Bond is thus equalised with the Guarantor’s national scale long-term Issuer rating.

The Account Bank, Stanbic IBTC Bank Plc, has a national scale short term rating of A1+(NG) by GCR. As such, there is no constraint to the indicative rating. Furthermore, the rating assumes that the conditions in the draft bond documentation will not change.

Outlook Statement

The Stable Outlook reflects that of the Guarantor’s national scale long term Issuer rating.

Rating Triggers

Any changes in the national scale long term Issuer rating of the Guarantor and/or revision in the terms of the Guarantee would impact the rating of the Series 1 Bonds.

Analytical Contacts

Primary analyst Femi Atere Senior Analyst
Lagos, Nigeria Femi@GCRratings.com +234 1 904 9462
Committee chair Julius Adekeye Head of Ratings, Nigeria
Lagos, Nigeria Adekeye@GCRratings.com +234 1 904 9462

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Corporate Entities, May 2019
GCR Rating Scales, Symbols & Definitions, May 2019
GCR’s Nigeria Country Risk Score report, August 2021
Infrastructure Credit Guarantee Company Limited rating reports (2017-2021)

Rating History

Rated Issue Review Rating scale Rating Outlook Date
N10bn Series 1 Senior Guaranteed Bonds Initial/Last National AAA(NG)(IR) Stable August 2021

Glossary

Account Bank A bank where the transaction account is held.
Agreement A negotiated and usually legally enforceable understanding between two or more legally competent parties.
Arrears An overdue debt, liability or obligation. An account is said to be ‘in arrears’ if one or more payments have been missed in transactions where regular payments are contractually required.
Bond A long-term debt instrument issued by either a company, institution, or the government to raise funds.
Bondholder Investor of capital market securities
Borrower The party indebted or the person making repayments for its borrowings.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Cash Funds that can be readily spent or used to meet current obligations.
Coupon The interest paid on a bond expressed as a percentage of the face value. If a bond carries a fixed coupon, the interest is usually paid on an annual or semi-annual basis. The term also refers to the detachable certificate entitling the bearer to the interest payment.
Covenant A provision that is indicative of performance. Covenants are either positive or negative. Positive covenants are activities that the borrower commits to, typically in its normal course of business. Negative covenants are certain limits and restrictions on the borrowers’ activities.
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.
Enforcement To make sure people do what is required by a law or rule et cetera.
Exposure Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on one source of funding. In insurance, it refers to an individual or company’s vulnerability to various risks
Forecast A calculation or estimate of future events.
Income Money received, especially on a regular basis, for work or through investments.
Interest Cover Interest cover is a measure of a company’s interest payments relative to its profits. It is calculated by dividing a company’s operating profit by its interest payments for a given period.
Interest Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.
Issuer The party indebted or the person making repayments for its borrowings.
Legal Opinion An opinion regarding the validity and enforceability of a transaction’s legal documents.
Lender A credit provider that is owed debt obligations be a debtor.
Long Term Rating See GCR Rating Scales, Symbols and Definitions.
Market An assessment of the property value, with the value being compared to similar properties in the area.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Operating Cash Flow A company’s net cash position over a given period, i.e. money received from customers minus payments to suppliers and staff, administration expenses, interest payments and taxes.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Rated Securities Debt securities that have been accorded a credit rating.
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Security One of various instruments used in the capital market to raise funds.
Senior A security that has a higher repayment priority than junior securities.
Structured Finance A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.
Surveillance Process of monitoring a transaction according to triggers, covenants and key performance indicators.
Transaction A transaction that enables an Issuer to issue debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions.
Trust A third party that acts in the best interest of another party, according to the trust deed, usually the investors. Owner of a securitisation vehicle that acts in the best interest of the Noteholders.
Trustee An individual or firm that holds or administers property or assets for the benefit of a third party.

SALIENT POINTS OF ACCORDED RATING

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 the Issuer and the Transaction Arrangers. 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.

The Issuer and the Transaction Arrangers 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 the Issuer and other reliable third parties to accord the credit rating included:

  • Draft Shelf Prospectus,
  • Draft Programme Trust Deed,
  • Draft N10bn Series 1 Pricing Supplement,
  • Draft N10bn Series 1 Trust Deed,
  • Legal Opinion from the Solicitor to the Trustees,
  • Draft InfraCredit’s Deed of Guarantee,
  • Draft Series 1 Account Bank Agreement,
  • 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.


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.