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GCR accords an Indicative Rating to Sundry Foods Funding SPV Plc’s Series 1 N8bn Bonds.

Lagos, 22 June 2021 – GCR Ratings (“GCR”) has accorded an indicative long term credit rating of A-(NG)(IR) to Sundry Foods Funding SPV Plc’s proposed N8bn Series 1 Senior Unsecured Fixed Rate Bonds, with the Outlook accorded as Stable.

Rated Entity/Issue Rating class Rating scale Rating Outlook / Watch
Series 1 N8bn Senior Unsecured Bonds Long Term Issue National A-(NG)(IR)* Stable

*IR stands for Indicative Rating.

Rating Rationale

Sundry Foods Funding SPV Plc, the Issuer, is a special purpose vehicle owned and sponsored by Sundry Foods Limited (“Sundry Foods” or the “Sponsor”) as a funding entity, solely for the purpose of raising finance for its Sponsor. The Issuer has filed an application with the Securities and Exchange Commission to issue bonds into the Nigerian capital market, under a N20bn Bond Issuance Programme and is in the process of raising an initial N8bn in Series 1 Senior Unsecured Bond Issuance. The Series 1 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 and all other senior unsecured and unsubordinated indebtedness and monetary obligations of the Issuer, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

The Sponsor, Sundry Foods, is one of the leading food service companies in the Nigerian Quick Service Restaurants industry. GCR accorded a long term entity rating of A-(NG) to the Sponsor, with a Stable Outlook in June 2021. The rating was underpinned by Sundry Foods’ strong competitive position in its niche market, well-established brands across various business segments and its relatively strong financial profile.

The Programme Trust Deed does not offer Series 1 Bondholders any security over assets but does feature a negative pledge and other covenants to protect the interest of Bondholders.

Sundry Foods, the Issuer and the Bond Trustees are entering into a covenant, pursuant to which Sundry Foods, in its capacity as the Guarantor, absolutely, irrevocably and unconditionally guarantees the punctual and full payment of all debt and obligations owed by the Issuer under the Programme. According to the Deed of Undertaking, Sundry Foods undertakes that if the Issuer does not pay any of the obligations, it will immediately perform the payment obligations of the Issuer as if it were the primary obligor.

Given that Sundry Foods offers timely and full coverage of all payments due to the Bondholders, under 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.

That said, a change in the rating of the Sponsor will directly impact the rating of the Series 1 Bonds.

Outlook Statement

The Stable Outlook reflects GCR’s opinion that Sundry Foods will generate robust earnings and cash flow, which will continue to support strong capital structure, gearing and liquidity profile.

Rating Triggers

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

The successful rollout of new stores with proven systems to manage the enlarged business will contribute to the attainment of the robust medium-term earnings targets. This should enable Sundry Foods to fund a larger portion of expansion internally, without a need for additional debt.

Negative rating movement could emanate from delays in project rollout and/or adverse exogenous factors, which constrain sales volume, leading to earnings underperformance. If this follows a steep rise in gross debt, there could be a deterioration in credit protection metrics.

Analytical Contacts

Primary analyst Busola Akinrolabu Analyst
Lagos, Nigeria Busola@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 Ratings Scales, Symbols & Definitions, May 2019
GCR Nigeria Country Risk Scores, February 2021
GCR Nigeria Corporate Sector Risk Scores, February 2021
Sundry Foods Limited’s Issuer Rating Report, June 2021

Ratings History

Sundry Foods Limited

Rating class Review Rating scale Rating class Outlook Date
Long Term issuer^ Initial National BBB-(NG) Stable October 2010
Short Term issuer^ Initial National A3(NG)
Long Term issuer* Last National BBB(NG) Stable September 2013
Short Term issuer* Last National A3(NG)
Long term Issue Initial/Last National A-(NG)(IR) Stable June 2021

^/*Performed under Criteria for Rating Corporate Entities, 2010/ 2013.

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 ratings process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to Sundry Foods Limited. 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.

Sundry Foods Limited participated in the rating process via telephonic management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Sundry Foods Limited and other reliable third parties to accord the credit ratings included:

  • 2020 audited annual financial statement, and prior four years annual financial statements;
  • Three-month management accounts to 31 March 2021;
  • Draft Programme Trust Deed
  • Draft Series 1 Pricing Supplements
  • Draft Shelf Prospectus
  • Draft Series 1 Trust Deed
  • Draft Master Notes Issuance Agreement
  • Draft Deed of Undertaking
  • Draft Legal Opinion on Deed of Undertaking, by Templars.


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